The Fed Strikes Back
Terry H. Schwadron
Sept. 20, 2024
The long-awaited vote this week by the Federal Reserve to ease basic borrowing rates — by more than the predicted slightest amount — already is being glorified in financial markets and political campaigns.
If you have money, availability of lower-interest loans will be an immediate boost. For the rest of us, not so much right away, but there is new hope towards jobs and lower interest rates.
At local markets yesterday, egg and milk prices were still high. Voters who insist that individual family fortunes were better off under Donald Trump’s administration won’t be recognizing that inflation has crested or been tamed by such an extended close watch on economic factors.
Nevertheless, the Fed’s sober, slow, deliberate path to tighten money supplies has proved a national (and even international) success that has left the U.S. with the strongest economy in the world. Still, Donald Trump criticized it as a mark of a “weak economy,” seeing an image different from every economist in the country.
No votes in our election will change because the Fed’s vote, but the decision might just show a path towards promises to ease some financial pressures on home-buying and other big-ticket investments. In turn, that sigh of financial relief will temporarily buoy restive discomfort that our politicians somehow should ensure that everyday life is easier.
Indeed, media voices were churning over whether the Fed decision was coming too late to affect the election or whether the election’s distinctly different economic policy leans might be influencing just how slight or big the Fed’s decision should be. For his part, Jerome Powell insists only that the Fed follows its own data, not the political thinking being aired. We’ll never know.
We’re told repeatedly that it is consumer confidence that drives matters economic and political. Maybe that’s a fancy way to get around the fact that who is sitting in the White House may not have as much effect on prices as all the campaign language would have one believe. And the small group of business regulators at the Fed are concerned with economic measurements that skip over supermarket and fuel pump prices.
Building on Good News
As things stand, however, the main elements of inflation have been knocked down, gas is selling at a lower price than in the last few years, the monthly rise in food prices has been brought down, and overall growth numbers, employment rates and productivity are seen as near the goals set for those areas. Our currency is strong, markets up, and our pols are talking about lowering prices, whether we believe them or not.
Rents and home-buying are identified problem areas for which Kamala Harris says she has a plan or two, and Trump says magically will disappear as he deports immigrants.
To a certain extent, we will get economic policy that builds on these successes or overturns them completely, as we vote in November. The candidates may not control prices, but they will be setting policy either aimed at using governmental power to focus on economic problems or not. In most assessments,
Trump’s promises for global tariffs against all foreign trades bodes poorly both for consumer prices and for any sustained Fed policy about lowered borrowing rates, but then Harris’ plans depend on additional government spending on housing subsidies and a drive to halt corporate “price-gouging.” The candidates are diametrically opposite on tax policy too.
The word I’m left with through all this is “trust.” Depending on whom you trust, you get a different story about the state of our economy, and therefore on a path for the future. With such different plans for everything from climate and energy to incentives for manufacturing to trade relations and taxes, the candidates can’t both be fully right. Harris is being pressed now for details on her housing plans, while Trump seems to change the subject anytime asked about a specific program from child tax credits to the effects of across-the-board tariffs.
Our Tax Dollars at Work
Then there is the Congress in this discussion, blithely still talking about shutting down the government a few weeks before the election. Even enough Republicans in the House and Senate were sufficiently alarmed to shoot down a vote this week that would have tied a federal budget resolution to a bill that demands that already-banned voting by immigrants be banned anew with bigger penalties.
Despite lacking the votes needed, House Speaker Mike Johnson, R-La., insisted on putting his anti-immigrant bill on the floor, only to lose a bill that already was certain to die in the Senate. Even Senate Republican leader Mitch McConnell called the potential shutdown “politically beyond stupid.”
For those tracking the election, it is worth noting that Donald Trump had urged the Speaker to close the government over the illegal voting non-change.
Meanwhile, Senate, Republicans killed a second attempt to preserve legal status for IVF fertilization treatments that are endangered by various state abortion laws. Their opposition kept the results from reaching a needed 60-vote majority — even after Trump was promising voters he would ensure that IVF treatments would not only be legal but paid for by mandated insurance ooverage or directly by the federal government.
You could file all of this in the pandering-to-voters file or under the ineffective- government folder, but either way, they were more examples of looking at what they do rather than what they say.
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