As has been the case since the economy crashed six years ago, prices are stable. In fact, this represents the 29th consecutive month that inflation has come in below the Federal Reserve's target of 2%. Interest rates have been similarly quiescent.
Fed officials in 2012 predicted inflation between 1.6 and 2 percent this year. Sept. data show they’re still wrong. pic.twitter.com/SwXEm5MoyE— Binyamin Appelbaum (@BCAppelbaum) October 31, 2014
These facts seem astonishing when you consider that, in congressional testimony from March 2011, former Sen. Alan Simpson, R-Wyo., and Erskine Bowles, the White House chief of staff under President Bill Clinton, were warning that the growing federal debt would soon induce an economic crash replete with soaring inflation and interest rates.
"The markets will absolutely devastate us if we don’t step up to this problem. The problem is real. The solutions are painful, and we have to act.” said Bowles. “I think it will come before two years.” said Simpson.
But, Bowles-Simpson was never adopted and, as today's data reminds us, there was no catastrophe. In fact, with the perspective of three years, we can look back now and recognize that had we cut federal spending in the ways the plan called for, the effect, if anything, would have been to plunge us back into recession and perhaps trigger deflation, a phenomenon that frequently accompanies all out depressions.
Still, as recently as this year Joe Manchin was telling Politico, "I still hold out hope that the president will dust off the Simpson-Bowles framework and put the force of presidential leadership behind it" . . . God help us.
But, long before he arrived in Washington, Manchin had proved himself a sucker for economic snake oil. During his term as West Virginia governor, Manchin championed and won implementation of a menu of corporate tax cuts on the theory that, by doing so West Virginia would become more attractive to business and more competitive. Yet, despite the fact that West Virginia emerged from the 2008 financial meltdown far less damaged than most states and despite the fact that West Virginia had an economic tailwind provided by the advent of fracking to tap the state's abundant natural gas supply, West Virginia's economy, rather than booming, has posted nearly worst-in-the-nation levels of job and income growth ever since.
It's been Joe Manchin's great political fortune that he left the governor's office before the effects of his policies were felt. And every day he must thank his lucky stars as he watches the travails of Kansas Governor Sam Brownback, who is suffering a political meltdown due in large part to his applying the same economic prescriptions with nearly the same effects as they had in West Virginia. So, while Brownback is crucified, Manchin floats placidly along carefully nurturing his image as a moderate and a voice of reason.
The tragedy isn't just that the press generally treats Manchin so uncritically. Almost never is he confronted with hard questions about his economic policy preferences either now or when he was governor of West Virginia. The tragedy is also that, as his comments to Politico show, Manchin seems unwilling or unable to critically examine his own policies and when necessary change them. That makes him a problem for all of us both now and perhaps in the future as well.