During the Great Moderation, right-wingers were generally economic optimists and left-wingers tended to be economic pessimists. After all, the Great Moderation began with a series of free-market economic reformsâ€”tax cuts, deregulation, tight money. This gave the right a vested interest in defending the performance of the economy, while it made the left more inclined to emphasize its flaws. Hence, it was fairly common to see free-market intellectualsÂ writeÂ booksâ€”even under Bill Clintonâ€”arguing that the economy was doing better than people thought.
In particular, conservatives would argue that the official Consumer Price Index was over-stating the rate of inflation, thereby under-stating the rate at which things were improving. Meanwhile, left-of-center thinkers tended to accentuate the negative, arguing that the lot of the average worker has barely improved at all, and may have actually declined, since the 1970s.
Since the financial crisis started, the roles have largely been reversed. Obviously liberals donâ€™t think the economy is doing great, but itâ€™s conservatives who believe the economy is in deep trouble.
One of the most striking ways this has manifested itself is that the CPI debate has flipped. Today many grassroots conservatives suspect that the CPIÂ under-states inflation and speculate that the government is doing this deliberately to camouflage what they regard as the Fedâ€™s inflationary policies.
I donâ€™t think this is primarily a matter of hypocrisy. Rather, a lot of new people were brought into the conservative movement by Ron Paul and the Tea Party, and those folks were never on board with the optimism of the right-wing establishment. But itâ€™s put conservative elites in an awkward position, because they suddenly find their grassroots supporters taking a position opposite to the one theyâ€™ve been taking for decades.
I think this shift in the conservative mood helps to explain the fissure over monetary policy Reihan hasÂ written about.Â Take me, for example. I was on board with the right-wing optimist viewpoint prior to 2008. I thought the policies of the last three decades had been generally good ones, and that the official inflation statistics were under-estimating the rate of progress.