I am the father or stepfather of six children. Yes, on their behalf, I am concerned about the possibility that an overly inflationary psychology will develop in my country. Yes, on their behalf, I am concerned that an excessive debt not be placed upon them.
But I am vastly more concerned, because I care about their long-run future, that a slack economy will not provide them with adequate jobs when they leave school. I am vastly more concerned, on behalf of their long-run future, that they will live in a country with decaying infrastructure that will not permit investment to maintain leadership. I am more concerned on their behalf that inadequate resources forced by countercyclical austerity will stunt the ability of their generation to be educated. I am more concerned, on their behalf, that excessive austerity-oriented policies will lead to slower economic growth, and as a consequence to ultimately higher debt-to-annual-GDP ratios--and more pressure, in terms of higher tax burdens, on the future.
Those concerns, which come out of the improper management of current conditions, seem to me to be a larger issue especially for the long run than the concern that somehow unstable and overly expansionary policy starting from where we are now will stunt the opportunities that are open to them.
Now, of course, if policy were starting from a different place I would reach a different judgment.
But starting from where the United States or much of Europe or much of the rest of the industrialized part of the world is starting today, the risks of profound stagnation are a more pressing concern than the risks of a resurrection of stagflation.
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