What was so bad about inflation ?
Was inflation a huge problem in the USA in 1980 ?
It is clear that the public saw it to be a huge problem (often in the 70s inflation was listed as the worse problem faced by the USA).
This is related to tax policy, because inflation has huge effects on taxes given the use of nominal quantities in the tax code. The one good point which supply siders (meaning Feldstein) made according to Krugman was to argue for adjusting the tax code so that real capital gains, real interest income and real corporate income was taxed instead of nominal amounts which make real taxes insanely high during periods of inflation. Without other changes this would imply a large drop in revenues, but the point is that tax rates should not change exogenously due to inflation.
Aside from that, mainstream economists generally don't understand what is so horrible about inflation. Economists who wish to be policy relevant accept low inflation as a policy goal (because it is). However, many economists (e.g. Robert Solow) argued that inflation wasn't a big problem in 1980 (at a debate at the K school).
Some economists (including this one) think the hatred of inflation was based on totally silly logic in which inflation meant price increases and people assumed that nominal wage increases had nothing to do with inflation. That is people said they would like their real wages to grow 10% more a year (assuming they would keep their jobs).
It remains taboo to say that, say 12% inflation, is no big deal. I hereby violate that taboo.
