Cochrane only responsible fiscal policy, not monetary policy can solve inflation

Seems a bit bait-and-switchey given the long arc of Cochrane's policy advice pushing for higher interest rates

The current inflation was sparked by fiscal policy—the government printed or borrowed about $5 trillion, and sent checks to people and businesses. The U.S. has borrowed and spent before without causing inflation. People held the extra debt as a good investment. That this stimulus led to inflation thus reflects a broader loss of faith that the U.S. will repay its debt.

Slowing the economy isn’t guaranteed to reduce inflation durably anyway. Even in the 2008 recession, with unemployment above 8%, core inflation fell only from 2.4% in December 2007 to 0.6% in October 2010, and then bounced back to 2.3% in December 2011. At this rate, even temporarily curing 6% May 2022 core inflation would take a dismal recession. In 1970 and 1974, the Fed raised interest rates more promptly and more sharply than now, from 4% to 9% in 1970 and from 3.5% to 13% in 1974. Each rise produced a bruising recession. Each reduced inflation. Each time, inflation roared back.

The Phillips curve, by which the Fed believes slowing economic activity reduces inflation, is ephemeral. Some recessions and rate hikes even feature higher inflation, especially in countries with fiscal problems.

Higher interest rates will directly make deficits worse by adding to the interest costs on the debt. Reducing inflation was hard enough in 1980, when federal debt was under 25% of gross domestic product. Now it is over 100%. Each percentage point interest rates are higher means $250 billion more in inflation-inducing deficit.

Monetary policy alone can’t cure a sustained inflation. The government will also have to fix the underlying fiscal problem. Short-run deficit reduction, temporary measures or accounting gimmicks won’t work. Neither will a bout of growth-killing high-tax “austerity.” The U.S. has to persuade people that over the long haul of several decades it will return to its tradition of running small primary surpluses that gradually repay debts. That outcome requires economic growth, which raises long-run taxable income. Raising tax rates alone is like climbing a sand dune, as each rise hurts income growth. The U.S. also needs spending reform, especially on entitlements. And it needs to break the cycle that each crisis will be met by a river of printed or borrowed money, bailouts for big financial firms and stimulus checks for voters.