By Betsey Stevenson and Justin Wolfers
Paul Ryan believes the United States has a looming inflation problem. The reality is that Ryan has an economic credibility problem.
The latest iteration of the Wisconsin representative's budget for the U.S. government spells out what he sees as a major threat to the economy: "Pressed for cash, the government will take the easy way out: It will crank up the printing presses. The final stage of this intergenerational theft will be the debasement of our currency. Government will cheat us of our just rewards. Our finances will collapse. The economy will stall."
It's a stark forecast, in which the driving force is "debasement of the currency," which is simply a rhetorically loaded term for inflation. Ryan's views on the economy are premised on his forecast that the country is headed for a central-bank induced monetary disaster.
This sort of fear-mongering sells well among gold bugs, doomsday preppers and other tea party types. But it rests on very shaky ground. So shaky, in fact, that either Ryan is being dishonest or he's placed himself on the Spam-hoarding radical fringe, far outside any standard approach to monetary economics.
For instance, the latest projections from the Federal Reserve's policy-setting Open Market Committee suggest that long-run inflation will average 2 percent, consistent with its stated long-run target. Of course, in Ryan's view, the Fed would say that, just to hide its intentions ahead of an inflationary surprise.
What do professional economists say? The Survey of Professional Forecasters summarizes the projections of private- sector economists, academics and econometric models, lacking any nefarious agenda that one may ascribe to the Fed. In the latest survey, the median projection among these economists is for inflation to average 2 percent over the next decade. Even the most alarmist forecast sees inflation averaging no more than 3 percent. These 46 economists draw on a wide variety of views about the economy, yet Ryan is more extreme than all them — by a substantial margin.