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Jim Lane

Profile Information

Name: Jim Lane
Gender: Male
Hometown: Jersey City
Member since: Fri Nov 12, 2004, 10:22 AM
Number of posts: 5,176

About Me

I spend most of my online time on Wikipedia, where we desperately need more people to help counter right-wing bias. Please PM me whenever you want help with a Wikipedia-related issue. (Remember that Wikipedia material must be neutral, but we can and should include facts that conservatives would prefer to suppress.)

Journal Archives

Right-wing economist admits error! (This blizzard must have caused Hell to freeze over.)

In 2009, famed supply-sider and Reagan adviser Arthur Laffer wrote a Wall Street Journal piece that was typical deficit hysteria: "Get Ready for Inflation and Higher Interest Rates". Pointing to the deficit and, even more, to the Fed's expansion of the money supply, he gave his confident prediction:

(S)uch a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.

But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.


So far, so normal. We've been hearing stuff like this from the right wing for years. It's not limited to Republicans -- I'm looking at you, Erskine Bowles. (See "Bowles, Simpson: Fiscal Crisis Could Come Within 2 Years" from March of 2011.)

What's different about this story is that, unlike most of his comrades in arms, Laffer has looked at some actual facts and revisited his prior prediction in light of real-world data:

Obviously, nothing like that happened.

In an interview with Business Insider from his office in Tennessee, Laffer admitted that he was wrong. The old maxim that dictates increasing the availability of cash through lower interest rates will lead to higher prices, he said, may need to be reexamined.

"Usually when you find the model this far off, you've probably got something wrong with the model, not that the world has changed," he said. "Inflation does not appear to be monetary base driven," he said.


(from "ART LAFFER: I Was Wrong About Inflation And The Fed", emphasis in original)

Now Paul Krugman will have to admit that he was wrong. He's written that these bad ideas are like cockroaches, that can't be eradicated, and like zombies, that continue to shamble about long after they've been killed. Perhaps he'll take heart that his sad observation, while mostly true, isn't completely true.
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