The best part of this whole financial meltdown has to be watching Sarah Palin try to pretend that she has valuable insights on monetary policy. It's kind of cute, really, like watching a four year old sitting in front of a chess board, moving the pieces around at random.
Not that I'm a grandmaster, by any means. I know just enough to recognize when someone is playing well and when someone is bouncing the knight all over the board and making whinnying noises. Krugman is putting grandmaster level stuff on his blog. Palin doesn't know how the pieces move.
Palin fears runaway inflation -- in fact claims it's already occurring -- even though the last two years have had such tame inflation that we didn't need to increase Social Security payments to keep pace. Which, if you've been watching FOX News' ongoing quest to terrify the elderly, is All Obama's Fault.
When the non-inflation was pointed out to her, she lashed out at the messengers, because someone at their very own newspaper -- don't you guys read your own newspaper? -- ran a story explaining that food prices were, well, very low but starting to creep up again. 1.4% inflation is ridiculously low by historical standards, and by any objective measure, Palin was just plain wrong.
In a second Facebook broadside, she blames our slow economy entirely on burdensome government regulation, high taxes, and businesses living in fear of Obama's next major initiative.
Which is pure idiocy. If it were Obamaphobia keeping businesses from expanding and hiring, their terror would have been assuage the moment CNN declared that the Republicans had retaken the House. Obama won't be passing any major government-expanding initiatives or oppressive, burdensome government regulations anytime soon, so by Palin-logic (as opposed to the real sort) those mountains of cash that corporations are sitting on should be on their way.
Maybe she should start listening to the actual economists, who are pointing out the blindingly obvious: companies aren't hiring because they don't see much demand for their products.
Taxes are already absurdly low. They're low as a percentage of GDP, when compared to the rest of the industrialized world. They're low by historical standards; we've paid much more in the past. We paid much more during the Clinton years, which were years of spectacular growth for people of all incomes. Bush cut taxes, and gave us a decade of anemic growth, the largesse of which went almost entirely to the wealthiest 5%. Oh, and need I mention that all that anemic growth was followed by the collapse of the whole economy?
Lastly, it shouldn't even have to be argued that more "burdensome government regulation" would have prevented much of the recent economic collapse. The fact that supposedly serious people can claim otherwise is a testament to the power of the right-wing noise machine.
Palin is a card-carrying member of that noise machine. Gears in that machine don't get held accountable for anything. Their proposals don't have to make sense, so long as the person doing the proposing sounds confident. That's why Palin can talk about how we need to be serious about paying off our national debt in one paragraph, and then demand huge tax cuts for the wealthy in the next. Actual economists know that tax cuts have never come close to "paying for themselves," and that in a situation like ours where there are mountains of cash lying idle, adding more to the pile is an ineffective way to stimulate the economy.*
Her last mistake is to imply that inflation is bad for most Americans. Actually, moderate inflation is good for just about anyone who has a mortgage. Their debts become worth less as the years go by. If you owe as much on your house as you have set aside in your 401K, inflation is robbing Peter, paying Paul, and then telling Paul to write Peter a check. As Paul Krugman pointed out (for which the Nobel-prizewinning economist received a tongue lashing from our girl Sarah) inflation did a lot to make our post-WWII debt more manageable.
Who does inflation hurt the most? People who have grotesque sums of cash lying around. Which I believe is why, even though the economy would be generally better off if the Fed targeted lower unemployment and higher inflation, they continue to choke off inflation. The Fed is run by rich people and people who hang out with rich people. The only thing that makes QE2 palatable to them is the fact that the new money will go straight to banks. If the plan were to print new money and sending it to people who would actually spend it (you and me and people poorer than you and me), they'd be screaming bloody murder.
The point is, Sarah Palin really sucks at this, and I pity the people who mistake her semi-coherent, ghostwritten Facebook posts for genuine economic thought.
* That actually *is* a problem with QE. But it's just about the only weapon the Fed has left. Normally it would be lowering interest rates to juice the economy, but they can't lower it below zero, because it rips a hole in the fabric of spacetime. We don't want that.