All of this has been another failure of progressive economics. By focusing solely on macroeconomic demand, while ignoring supply-side and regulatory bottlenecks, their policies fueled the inflation we have today. They also ignored the role of excess money, forgetting economist Milton Friedman’s famous lesson. As President Biden declared in an April 2020 interview, “Milton Friedman isn’t running the show anymore.” That is one campaign promise he has kept.
Progressives pushed the same agenda for months even as evidence of inflation became too obvious to ignore. Inflation was supposedly “transitory.” The White House kept pressing its Build Back Better (BBB) plan for nearly $5 trillion in new spending—and even claimed it would be a cure for inflation.
No fewer than 17 Nobel prize winners in economics endorsed all this in a remarkable “open letter” last September. The White House broadcast the letter far and wide, and Mr. Biden referred to it often as an appeal to authority. “Because this agenda invests in long-term economic capacity and will enhance the ability of more Americans to participate productively in the economy, it will ease longer-term inflationary pressures,” said the letter.
We list the names of the letter’s signers nearby. They are all notable economists, and some have written for these pages. Since BBB didn’t pass, they can say the predictions in their letter were never tested. But their inability to see in September that inflation was already rising fast makes their claims almost worse as a failure of expertise. Annual inflation hit 6.2% in October last year and is now above 8%.