A little inflation appears to be a free lunch, lubricating the economy and gradually erasing past financial mistakes. But the nature of the free lunch is that its costs aren't absent—they're just distributed broadly. And in the case of low but steady inflation, the broadly distributed costs are borne by the middle class. Over time, rising prices have eroded American workers' standard of living. And, over time, the Federal Reserve's persistent easy money hurts the very person it is presumably intended to help, the American worker.

The notion that modest inflation is helpful to labor dates to John Maynard Keynes's "General Theory of Employment, Interest and Money." Keynes pointed out that the supply of labor is not a function of real wages alone. Rather, the instance in which the supply of labor is determined solely by real wages is a special case that fits into his broader "General Theory," which showed the strong influence that observed wages have over the supply of labor.

He noted workers' strong preference for a 2% wage increase in a 4% inflation environment to a 2% decrease in wages during a period of constant prices. But he also drew from this preference the obvious policy conclusion: A constantly rising price level can be used to make actual declines in wages more palatable, thereby reducing conflict with labor and leading to higher short-run employment.

The Federal Reserve doesn't just understand workers' tendency to use observed prices as a proxy for real prices; under Chairman Ben Bernanke's leadership, the Fed has become increasingly bold in the exploitation of this tendency. With inflationary expectations not yet unsettled by the Federal Reserve's $2 trillion balance-sheet expansion, Mr. Bernanke has committed the Fed to an open-ended round of quantitative easing in hopes of trading a little extra inflation for a little short-term employment.