100 US dollar banknotes symbols of the global economy spread out on a table in Clermont-Ferrand France on June 12 2025. (Photo by Romain Costaseca / Hans Lucas via AFP) (Photo by ROMAIN COSTASECA/Hans Lucas/AFP via Getty Images)
Hans Lucas/AFP via Getty Images
Just as the left captured the formerly laudatory descriptor of “liberal,” economists have stolen “inflation.” Once evidence of currency shrinkage, inflation has now become too much economic growth. Worse, implied in the impossibility of “too much economic growth” is the thoroughly bankrupt Keynesian notion that government spending is a primary accelerator of the economic growth.
The latter is precisely what Larry Summers meant back in 2021 when a newly-elected President Biden did as a re-elected President Trump would have done and showered nearly $2 trillion more in “stimulus” spending on the American people. This was theoretical compensation for the tragic lockdowns foisted on Americans in 2020 by President Trump, and then nationally as then-President Trump signed a $3 trillion coronavirus bill into law that among other things, subsidized lockdowns in just about every U.S. state.
What rates stress about Summers’s analysis is that he’s a thoroughgoing Keynesian. In his vision of the world, government consumption is some kind of other, seemingly extracted from Pluto, only for the consumption by the state to expand the economy.
Conservatives have long viewed the world differently, particularly the conservatives at the Wall Street Journal’s editorial page. Such was the influence of Robert Bartley, longtime editorial page editor of the Wall Street Journal, along with his deputy, George Melloan. They embraced the crucial truth within Say’s Law that all consumption is preceded by production. And since governments produce nothing, they can hardly increase demand.
Summers, Paul Krugman, and other Keynesians have long believed differently. They imagine an economic “multiplier” born of government consumption as one dollar consumed by government would coarse through the economy, thus expanding beyond the $1. No, there’s production and nothing else.
Yet Summers once again saw inflation in the spending foolishly agreed to by Biden. The only difference in 2021-2022 was that wealth extracted from the private sector was suddenly inflation to conservatives. Most surprising was that the Wall Street Journal’s editorial page joined the inflation chorus with talk of “excess demand” born of government spending. Yes, the Keynesian multiplier. The Journal’s editorial page continues to sing in this chorus.
Last week an editorial contended that the Powell-led Fed’s policy choices caused “the inflation spike.” Somehow the Fed accommodated “blowout federal spending” as though the central bank can conjure up demand, plus it kept “interest rates low for too long.” The analysis combined Keynesian multiplier theory with discredited Phillips Curve thinking which says a central bank that produces nothing can somehow expand credit on the path to a growth-induced inflationary breakout.
None of it made sense, but it did make sense that prices would rise after the lockdowns from 2020. What fractures globalized production naturally results in higher prices just as what integrates global production naturally results in lower prices. The previous truths, long vivified by history, have been haughtily dismissed by the Journal’s editorial page. Really, what did Adam Smith know!?
Which brings us to one last thing: where was the decline in the dollar, whether against foreign currencies (check out the WSJ Dollar Index from 2020 to 2022) or gold during the time when the Journal claimed and claims to this day that Joe Biden and Jerome Powell’s policies caused inflation? That there was no notable decline is the factual truth, albeit one not discussed by the Wall Street Journal editorial page, and conservatives more broadly. Which raise the question yet again in this write-up’s title: just what exactly do conservatives think inflation is?