Progressives should fear inflation more than recession

But at the same time, recession isn’t the only economic danger to worry about. Moderate inflation might be tolerable, but high and accelerating inflation is itself a huge danger to the economy. In the extreme case, it can cause total economic collapse. Even if things never progress to hyperinflation, sustained rapid price rises can hollow out the middle class and lead to all the bad things Keynes warns about in the essay quoted above.

It was Keynes and his intellectual successors who left progressives in the West a precious inheritance — a method for balancing the risks of recession and inflation. If we use monetary and fiscal policy to boost aggregate demand when it’s too low and curb it when it’s too high, we can steer the economy between Scylla and Charybdis. But this requires discipline — we have to be willing to “take away the punch bowl” at some point. What separates Keynesians from macro-leftists (like the MMT people) is their willingness to make that call.

And if now isn’t the time to make that call, then when? Inflation is at its highest in 40 years, and much of this appears to be due to excessive aggregate demand. Recessions are bad, but a mild recession now is far preferable to the severe, Volcker-like recession that will be necessary to quell inflation if expectations become entrenched. And on top of that, inflation is probably a much bigger threat to progressive political priorities than a mild recession would be.