Yet somehow our consumer price index shows inflation rising at only 2%
All throughout 2013-2017, the CPI number has hovered either close to 2% or been below it. Keep in mind that the Fed’s goal is symmetric, meaning that to make up for the times when CPI is below 2%, there needs to be other times when CPI is above 2%. It blows my mind that throughout the late 80s and 90s we were hitting anywhere from 3-5% and now we’re struggling to get 2%.
Education, housing, food, clothing, etc. are far more important and relevant to what it means to live a decent life in the 21st century.
This is a very confused comment. The part that's coherent enough to clearly identify what is wrong is that it refers to “fiscal policy” when it means “monetary policy”, which is the policy targeted at particular inflation rates. But even aside from that, the whole claim is incoherent.
Lower consumer prices would help make up for the reduced demand for labor. But rather than this being allowed to just happen, the overt policy is to keep labor from realizing these gains so that everyone keeps working "full time".
Not in dollar terms, especially when dollars are being deliverately managed so that the dollar cost of a labor hour increases over time.
In terms of labor-hours, sure.
> Lower consumer prices would help make up for the reduced demand for labor.
No, lower nominal (dollar) prices would not. Lower real prices are an incoherent concept. Lower labor-hour-equivalent prices would if and only if lower labor demand meant equal employment but reduced hours, otherwise it would just exacerbate the tangible inequality resulting from reduced labor demand.
> But rather than this being allowed to just happen, the overt policy is to keep labor from realizing these gains so that everyone keeps working "full time".
But, it's not: that's not what targeting low positive inflation is. That would only be the overt policy if there was an overt policy to reatrict real wage gains.
While I do think (at least large portions of) one of the two major parties is actively and deliberately pursuing policies with that goal, it's very much not an overt policy.
This is sophomoric relativism - achieving lower day-to-day prices is exactly how market competition works. It's tautological to justify a policy of changing the value of a dollar by rejecting analysis in terms of an unchanged dollar. When creating a new variable, you have to analyze it in terms of existing variables.
> lower nominal (dollar) prices would not [help make up for the reduced demand for labor]
It very clearly would if businesses said "we're going to reduce everyone's hours by 20%" while everyone's expenses went down 20% - everyone's budget would remain the same.
I'll give you that this won't happen so pleasantly uniformly. But posit E who remains employed, and U who is laid off. If the expenses of four such E's go down, they now have extra money to spend locally to create a new job for U. Whereas if the E's expenses remain the same, then U's only options to get money are to head towards where it is being printed or compete with the E's in a race to the bottom (which is why the price of easily-interchangeable labor is now set by "minimum wage" rather than the market).
> that's not what targeting low positive inflation is.
An explicit goal of inflationary monetary policy is to drive "full employment". So yes, pushing everyone to keep working full time is one of its overt goals. A goal that is regressive in the face of needing ever-less labor.
I'm obviously not going to convince you on the merits of this, especially in a few comments, and that's fine. It's just fundamentally dishonest to discard a political viewpoint by condescending from a paradigm that rules out said political viewpoint by construction.
That's true, but irrelevant. You are using microlevel concepts on a macro level where they are by-definition cannot apply.
> It's tautological to justify a policy of changing the value of a dollar by rejecting analysis in terms of an unchanged dollar.
You can't have lower overall consumer prices against an unchanged dollar, because the definition of a constant or unchanged dollar is that it is corrected for price-level changes.
You can have lower nominal prices (deflation) which doesn't have the effects you attribute to lower prices at all, and you can have lower consumer prices relative to wages, which, as I've explained, do what you want if and only if the reduction in labor hours is spread evenly. Which there is little reason to think it would be absent direct regulation; what you'd normally expect is increased unemployment, because transaction costs of hiring scale with number employed, not hours worked, so it's usually more efficient for business to have fewer full-time (or even overtime) workers rather than more short-hours workers. Regulation can change this, of course, by reducing number of hours worked before additional overtime compensation is owed and increasing overtime premiums.
> An explicit goal of inflationary monetary policy is to drive "full employment". So yes, pushing everyone to keep working full time is one of its overt goals.
That's...not what “full employment” means. I know that some people like to point to the product of labor force participation rate times the employment rate and call it the real rate of employment, but that's not what policymakers consider employment to be or what they are targeting maximizing with “full employment”.
It's to stimulate a level of economic activity at which there is a labor demand such that all the labor that people want to sell is sold (which is full employment, because employment rate is people selling labor divided by people trying to sell labor) less transactional inefficiencies, it is not intended to increase real costs to force everyone into the labor force (which wouldn't actually support full-employment, but a higher labor-force participation rate.)
When you get to the point of articulating an idea that can be clearly understood, it seems to always be a misunderstanding caused by misinterpreting basic economic terminology.
"It's just fundamentally dishonest to discard a political viewpoint by condescending from a paradigm that rules out said political viewpoint by construction."
(And we wonder why political polarization has gotten so extreme)
Concretely this dogma was formed based around a need to be manufacturing more stuff. Now we have plenty of stuff but are depleting our natural resources creating a massive surplus just to throw it away. I'd say it's time to revisit the assumptions of that dogma.
It has some flaws, like failing to take into account new products or improvements in products, as well as being susceptible to swings in volatile food and energy prices. But Core CPI excludes the more volatile pieces and I think it’s a reasonably good indicator.
Perhaps my single biggest gripe with CPI is that it fails to properly reflect changes in housing prices, because of how infrequently people sell/buy their house, and because in some parts of the country nobody rents, so price discovery is a little wonky in those places.
There are some people who try to provide alternative accurate information to the government's data, and it consistently shows far less rosy numbers that also match the historical record far closer.