It's Not 1980 Anymore

Bruce Bartlett reads Mike Pence's speech on economics:

[S]tagflation isn’t the problem today. We have stagnation all right, but the “flation” we are suffering from today doesn’t stand for inflation, but deflation. But because it is always 1980, right wingers are incapable of seeing that monetary policy functions very, very differently in an inflationary and a deflationary environment. They seem utterly incapable of comprehending constraints like the zero-bound problem, which sets a floor on how low interest rates can go. They are also incapable of seeing the exchange value of the dollar except in macho terms, which demands that the dollar be strong at all times.

Yglesias follows up:

There do seem to be a lot of people, Pence among them, who have a weird amount of trouble with the idea that you do different things in different circumstances. If inflation’s too high, you need tighter moneythat’s the early 1980s. But if nominal expenditures are too low, you need looser money. If high deficits are forcing the central bank to keep nominal interest rates high, you need a lower deficitthat’s the early 1990s. But if nominal rates are at zero and total spending is still too low, then you need a bigger deficit.

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