Over the past two and a half years inflation and debt hawk economists and economic theories have dominated the national (and recently international) public and pundit debate on the economy. Shortly after the passage of the American Recovery and Reinvestment Act (the stimulus bill) conservative economists pointed to rising interest rates as a sign of future inflation and government crowding out. Along with the rise of the Tea Party and the resurgent electoral prowess of the Republican Party this assertion has been at the core of the national debate over the need to reduce deficits and our long-term debt. Americans were barraged with stories describing the catastrophic consequences they would soon face due to overwhelming government debt and inflation resulting from increases in government spending. The ensuing three years saw interest rates on US debt rise and fall while never surpassing their May 2009 high of just over 4% (see chart) with the decreases never being explained and the increases always signifying fears about US debt and the need for debt reduction and fiscal austerity. Even the recent debt ceiling battle did not cause large spikes on the interest rates on US debt.
Despite continued, powerful evidence to the contrary (today the interest rate on 10 year treasury bills was 1.82%) the inflation and debt hawks have dominated the political narrative over the past several years. They oppose fiscal measures designed to alleviate the short-term pain faced by millions of unemployed Americans by arguing that we should not forsake the long-term for the short-term. The power of their narrative is such that they are never called on their previously wrong assertions and predictions and retain their credibility to prescribe solutions. Recent fears of a double dip recession and acknowledgement by policy makers of the stalled recovery should provide an opportunity for a new way forward such as President Obama’s American Jobs Act. If the American Left is looking for a response to the Tea Party (as some have suggested the current Occupy Wall Street protests will provide) perhaps it should attempt to instigate a mass movement to support policies designed to help the economy now thereby changing the narrative and exposing the fallacies and misguided ways of the past few years.