The right policy, we thought--and I think the evidence is pretty clear that we were 100% right--was to aggressively move to reduce the budget deficit in 1993 even thought the recovery was weak in order to eliminate any market expectations that high deficits would lead to higher inflation, and--more importantly--to eliminate any belief on the part of the Federal Reserve that it need to raise rates rapidly and far [sic?] to create a low-investment jobless recovery in order to guard against any possibility of a renewed inflationary spiral.
That was not an attack but a horizon-sighting of bond-market vigilantes--or perhaps only the market thinking the Federal Reserve thought it was about to get a horizon-sighting of bond market vigilantes.This is the famous episode where Clinton throws a tantrum over being pressured by Rubin and Greenspan to drop his campaign promise of enacting a middle class tax cut-spending bill and where Carville says he now wishes to come back as the bond market. Here is where the social democratic, Eisenhower-Republican elite political class bend the knee to the giant vampire squid financial sector. Clinton should have pulled a Shinzo Abe and replaced Greenspan.
DeLong writes "I think the evidence is pretty clear that we were 100% right." What's the evidence? A recent meme and topic of discussion has been the declining labor share of productivity gains. Ever since the 1980s we've a had a shampoo economy: bubble, bust, rinse, repeat. The 1990s look better in light of the 2000s, but they ended with a stock-tech bubble which morphed into a disastrous housing bubble.
Every recovery from a recent recession have been a slow "jobless recovery."
...and--more importantly--to eliminate any belief on the part of the Federal Reserve that it need to raise rates rapidly and far [sic?] to create a low-investment jobless recovery in order to guard against any possibility of a renewed inflationary spiral.George W. Bush increased deficits and failed to renew an inflationary spiral.
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