On the Road to Stagflation

Derek Thompson: “The first stagflation was imposed on America by outside forces. But imagine, hypothetically, that by some bizarre masochistic instinct, you wanted the US government to impose stagflation on its own country. What might you do in this totally hypothetical situation?”

“Well, maybe you would institute a legally dubious set of tariffs that immediately raised the price of all imports, including parts that manufacturers need to build things in the U.S. This would almost certainly raise the cost of durable goods, like cars and electronics. Meanwhile, if you really want to crush manufacturing, you might have the president change his mind on policy so frequently that banks and manufacturing firms couldn’t get together to invest in domestic plants.”

“Then, maybe, you would announce the most restrictive immigration policy in modern history and turn the Immigration and Customs Enforcement department into an extralegal paramilitary force that raided farm workers, construction workers, and manufacturing plants. Altogether, this might be sufficient to push down growth while forcing up prices.”

“Of course, all of this is happening.”