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federal reserve
Dems in Congress Vow to Fight 'Inflationary Policies' of Trump
"Make no mistake: imposing new tariffs, mass deportations, and politicizing the Federal Reserve will lead to skyrocketing prices," said the Joint Economic Committee chair.
Nov 13, 2024
Leading Democratic lawmakers used new federal inflation data on Wednesday to renew their warnings about the economic threat posed by U.S. President-elect Donald Trump and pledge to keep fighting for working America—despite minorities in Congress.
"Democrats continue to fight to lower costs, and we saw promising signs last month that the cost of energy, groceries, and new vehicles stabilized. But with President-elect Trump in office, the reality for Americans' finances will become bleak," said Sen. Martin Heinrich (D-N.M.), chair of the U.S. Congress Joint Economic Committee (JEC).
Throughout Trump's campaign against Democratic Vice President Kamala Harris, JEC Democrats released reports warning about Project 2025, a sweeping far-right policy plan for the next Republican president. Although Trump tried at times to distance himself from the Heritage Foundation-led initiative, it was crafted by at least 140 people who served in his first administration—and since Election Day, there have been clear signals from the president-elect's allies that "yeah actually Project 2025 is the agenda."
Heinrich said that "Trump and Republicans have led Americans to believe that their policies will lower costs, but make no mistake: imposing new tariffs, mass deportations, and politicizing the Federal Reserve will lead to skyrocketing prices. And that's only a sample of the inflationary policies Republicans have laid out in their Project 2025 playbook."
"Democrats have built a strong economy with smart policies that empower workers, grow the middle class, and lower costs for families. Meanwhile, Trump's policies will only help his CEO friends and ultimately lead to a weaker economy," he continued. "Democrats' commitment to families will not end because of a new Trump administration. We'll continue fighting to ease the financial burdens on families and ensure everyone across the country feels relief."
"American families cannot afford more Republican 'trickle-down' economics that throws the middle class under the bus while slashing taxes for billion-dollar corporations."
Congressman Brendan Boyle (D-Pa.), ranking member of the House Budget Committee, responded similarly to the consumer price index (CPI) data on Wednesday, declaring, "Make no mistake: Trump's tariffs are taxes by another name—and it is hard-working American families who will pay the price."
"While today's report continues to show the progress we've made under the Biden-Harris administration, CEOs are already talking about raising prices for consumers in response to Trump's tax hikes," Boyle noted.
NPRreported last week that "forecasters at Pantheon Macroeconomics project that a 10% tariff would increase inflation by about 0.8 percentage points next year and impose an additional drag on U.S. manufacturers." Companies warning of price hikes if Trump's tariffs are implemented include AutoZone, Columbia Sportswear, and Stanley Black & Decker.
"I am deeply concerned that Trump's plans will force Americans to pay higher prices for everything from clothing to groceries," Boyle said. "American families cannot afford more Republican 'trickle-down' economics that throws the middle class under the bus while slashing taxes for billion-dollar corporations."
Steven Mnuchin, Trump's former treasury secretary, recently toldCNBC that tariffs, sanctions on Iran, and tax cuts will be top issues for Trump—despite Congressional Budget Office analysis that extending tax cuts the Republican passed in his first term to serve wealthy individuals and corporations would add $4.6 trillion to the national deficit.
"The top priority is extending the Trump tax cuts and the signature part of his program. I think that should be easy to pass in Congress, particularly if the Republicans control the House as well," Mnuchin said last week. Since then, decision desks have confirmed Republicans will retain their House majority, in addition to seizing control of the Senate and Oval Office.
Senate Republicans elected Sen. John Thune (R-S.D.) as their next leader on Wednesday, just hours after the U.S. Bureau of Labor Statistics announced that, as expected, the CPI increased 0.2% in October and prices grew 2.6% over the last year. Economists said the data means the Federal Reserve will likely cut interest rates again next month.
Trump is set to be inaugurated in January and has suggested he may try to oust Fed Chair Jerome Powell, whom he appointed in 2017, despite legal barriers. Powell—who has faced criticism from some economists and progressive lawmakers for holding off on rate cuts for so long, at the expense of the working class—seems prepared to fight for his job.
As Fortunereported Monday:
During a news briefing on Thursday after the Fed cut rates, Powell was asked if he would resign if Trump demanded it, and Powell simply replied "no." Later he was asked if he thought a president has the authority to fire or demote a Fed chair or other Fed official in a leadership post, and Powell said, "Not permitted under the law."
That exchange prompted Sen. Mike Lee (R-Utah) to post on X, "The executive branch should be under the direction of the president. That's how the Constitution was designed. The Federal Reserve is one of many examples of how we've deviated from the Constitution in that regard. Yet another reason why we should #EndTheFed.”
Tesla CEO Elon Musk... then reposted it with a "100" emoji that indicates strong support.
Amid a wave of Cabinet picks, Trump announced Tuesday that Musk—the world's richest person and a leading supporter of his campaign—and fellow billionaire Vivek Ramaswamy will lead the not-yet-created Department of Government Efficiency, which will work to "dismantle government bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure federal agencies."
As Common Dreamsreported, Lisa Gilbert, co-president of the watchdog group Public Citizen, responded to the news by warning that "'cutting red tape' is shorthand for getting rid of the safeguards that protect us in order to benefit corporate interests."
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'Wowza': Economy Added 254,000 Jobs Under Biden-Harris in September
"This labor market," said one economist, "is the result of policy choices that prioritized full employment—as it turns out putting people first, works."
Oct 04, 2024
Friday's job report from the Bureau of Labor Statistics offered a "better than expected" picture of job growth as federal unemployment hit 4.1% and more than a quarter-million people were added to the payroll last month alone.
In what ABC Newsnoted was "one of the last major pieces of economic data before the presidential election," the jobs report offered an indication of economic strength—a possible boon to outgoing President Joe Biden's legacy and a political advantage to Democratic presidential nominee Vice President Kamala Harris ahead of November 5.
"U.S. hiring surged in September," the news outlet reported, "blowing past economist expectations and rebuking concern about weakness in the labor market."
Former Labor Secretary Robert Reich responded to the new data Friday morning by pointing out that "more jobs have been created during the Biden-Harris presidency than during any single presidential term in history."
Donald Trump "doesn't often tell the truth, but he was right about this," added Reich, who quoted the GOP presidential candidate in 2004 admitting that "the economy does better under the Democrats than the Republicans."
More jobs have been created during the Biden-Harris presidency than during any single presidential term in history.
Trump doesn't often tell the truth, but he was right about this:
"The economy does better under the Democrats than the Republicans." — Donald Trump in 2004 pic.twitter.com/32XQnqbbb1
— Robert Reich (@RBReich) October 4, 2024
"Wowza," said economist Justin Wolfers, a professor at the University of Michigan and a senior fellow at the Brookings Institute, in response to Friday's report.
Mentioning how payrolls grew by over 254,000 in September—"well above expectations"—and that large upward revisions were made to the August and July payroll numbers, Wolfers said the overall picture shows an "economic expansion that is motoring along."
September jobs report: US economy adds 254,000 jobs vs. 150,000 expected pic.twitter.com/fUZvzx8tuK
— Yahoo Finance (@YahooFinance) October 4, 2024
"It was 'wow' across the board, much stronger than expected," Kathy Jones, chief fixed income strategist at Charles Schwab, toldCNBC. "The bottom line is it was a very good report. You get upward revisions and it tells you the job market continues to be healthy, and that means the economy is healthy."
Pointing to a recent analysis by her colleague Josh Bevins, Economic Policy Institute (EPI) economist Hilary Wething on Friday credited the strong performance represented by the new jobs numbers as the result of specific policies by the administration.
"You might think we just magically stumbled upon a consistently strong labor market—but no, this labor market is the result of policy choices that prioritized full employment—as it turns out putting people first, works," said Wething.
Elise Gould, a senior economist at EPI, also championed the "strong" figures:
In a blog post on Thursday, ahead of Friday's report—Gould detailed the strength of the labor market, despite the real pain that many workers and families still feel in their day to day lives:
It is indisputable that the U.S. labor market is strong. The share of the population ages 25–54 with a job is at a 23-year high, median household incomes rose 4.0% last year, and real wage growth over the last four years has been broad-based and strong. The economy has not only regained the nearly 22 million jobs lost in the pandemic recession, but also added another 6.5 million.
Are some folks still having a hard time? Absolutely. Even when the unemployment rate is low, there are still sidelined workers, and it remains difficult for many families to make ends meet on wages that are still too low. Unfortunately, that's a long-term phenomenon stemming from a too-stingy U.S. welfare state, rising inequality, and the legacy of anemic wage growth during past economic recoveries. But when comparing the labor market with four years ago (during the pandemic recession) or even before the pandemic began, the answer is clear: More workers have jobs and wages are beating inflation by solid margins.
With the Federal Reserve easing interest rates, in part based based on the strength of the hiring trends alongside lower inflation, Friday's jobs report was welcomed as a show of strength for progressives who have argued since the Covid-19 pandemic that pro-worker policies—as opposed to endless fealty to the demands of corporate powers and Wall Street—alongside public investments can work together to create strong economic foundations for the nation.
"Today's strong jobs report confirms once again that we never had to throw millions of people out of work to tame inflation," said Kitty Richards, a senior fellow with the left-leaning Groundwork Collaborative.
"Thanks to big investments in [pandemic] relief, manufacturing, and green energy, inflation is low, and the economy is still delivering for workers," Richards said. "The pundits who said we couldn't have low unemployment, growing wages, and stable prices at the same time have been proven wrong."
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By Dragging His Feet to Lower Interest Rates, Powell Hurt the Energy Transition
Rising interest rates were hampering efforts to decarbonize energy supplies and electrify transportation, housing, and other key sectors.
Sep 19, 2024
Federal Reserve Chair Jerome Powell on Wednesday announced that the Federal Open Market Committee is lowering the federal funds rate by 50 basis points, yielding an effective rate of 4.88%. Finally. The Fed should have provided interest rate relief months ago. While this overdue move is welcome, we must reiterate that Powell’s deferral of interest rate cuts has hurt the clean energy transition and inflicted other economic harms.
I wrote at length about this problem in January 2024:
It has become ever more apparent over time that rising interest rates are hampering efforts to decarbonize energy supplies and electrify transportation, housing, and other key sectors. High interest rates have had the dual effect of rolling back productive investment and lowering consumer demand, causing substantial drops in the stocks of major solar, wind, and other renewables-based companies; undermining the deployment of offshore wind projects; delaying the construction of electric vehicle (EV) factories; and slowing the installation of heat pumps.
In effect, Powell is exercising veto power over the Inflation Reduction Act and ruining “the economics of clean energy,” as David Dayen explained recently in The [American] Prospect. President Biden’s signature climate legislation contains hundreds of billions of dollars in subsidies for green industrialization, but repeated interest rate hikes have driven up financing costs enough to outweigh them. As Dayen noted, this is especially the case because the law’s reliance on tax credits requires upfront investment decisions.
Last month, Dominik Leusder explained why rate hikes have been particularly destructive for the green transition. Leusder drew attention to the capital-intensive nature of renewable power projects, which “tend to trade lower operating costs (the input into wind farms and solar plants is ‘free’) against higher (in relative terms) up-front costs.” As he noted:
By one estimate, 70% of the expenditure for an offshore wind farm derives from capital costs, compared to 20% with a gas turbine plant. This means that the vast majority of IRA-related projects require a lot of debt-financed spending up front. As the cost of the debt increases with higher interest rates, so does the levelized cost of energy (LCOE), a measure of the average cost of producing a unit of energy (kilowatt- or megawatt-hour) over the lifetime of the plant. And it does to a greater degree with renewables, the swift adoption of which is premised on them being cheap and profitable for investors.
As a result, a lot of the much-needed expansion in renewables capacity and storage—which is highly time-sensitive given the escalating effects of the climate crisis—is offset until borrowing costs adjust to the point where new projects become viable. What is more, while rates are high, the larger and better capitalized firms can gain a higher market share. Their deeper balance sheets also make it easier to accept higher borrowing costs now in the hope of refinancing these loans at lower rates later. The concentration of market power in the renewables sector would have all the usual implications for consumer welfare and innovation, the latter being seen as key to the energy transition.
His essay goes on to detail the devastating global impacts of the Fed’s monetary austerity, which hits developing countries especially hard, and is worth reading in full. At home, Powell’s maintenance of a higher-for-longer interest rate environment has also exacerbated the housing affordability crisis.
Ironically, raising the cost of borrowing did little to alleviate inflation (the stated reason for the rate hikes). This should come as no surprise. The cost-of-living crisis of 2021 to 2024 wasn’t the result of a wage-price spiral of the kind that neoliberal economists like Larry Summers and Jason Furman said can only be contained through demand destruction (i.e., engineering higher unemployment). Instead, as I wrote earlier this year:
[I]t was fueled by sellers’ inflation, or corporate profiteering, and exacerbated by the elimination of the pandemic-era welfare state. When the onset of Covid-19 and Russia’s invasion of Ukraine upended international supply chains—rendered fragile through decades of neoliberal globalization—corporations bolstered by preceding rounds of consolidation capitalized on both crises to justify price hikes that outpaced the increased costs of doing business. That safety-net measures enacted in the wake of the coronavirus crisis were allowed to expire only made the situation worse.
Given that the recent bout of inflation “is inseparable from preexisting patterns of market concentration, progressives have argued against job-threatening rate hikes… and for a more relevant mix of policies, including a windfall profits tax, stronger antitrust enforcement, and temporary price controls,” I pointed out. “Unlike the blunt instrument that Powell has been wielding ineffectively, those tailored solutions—the last two of which are within the Biden administration’s ambit—have the potential to dilute the power of price-gouging corporations without hurting workers.”
It’s noteworthy that during Powell’s August 2024 speech at the annual gathering of central bankers in Jackson Hole—where he signaled Wednesday’s pivot on monetary policy—the Fed chair excluded any mention of how the consolidation of corporate power contributed to rising prices in his explanation of the latest inflationary period.
This is significant because the Fed’s traditional inflation-fighting tool (i.e., raising interest rates to increase unemployment until demand and prices decrease) is ill-suited to confront our worsening polycrisis. It couldn’t effectively combat the supply shocks and corporate profiteering underlying the 2021-2024 cost-of-living crisis (disinflation occurred without mass joblessness despite Powell’s actions, not because of them). It also cannot solve cost-of-living struggles stemming from the fossil fuel-driven climate crisis.
The Roosevelt Institute’s Kristina Karlsson and Lauren Melodia showed in a 2022 paper that besides warming the planet, fossil fuel-based energy systems are inherently price volatile and a significant driver of inflation. The upshot is that shifting from coal, oil, and gas to renewables can permanently lessen inflationary pressures. Dovish monetary policy can help propel investment in wind, solar, and other green power sources.
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