Of all the norms President Joe Biden has proven willing to run roughshod over, there is at least one principle that the president has pledged to respect: the independence of the Federal Reserve. The rest of the Democratic Party, however, has ramped up its blame campaign, attempting to bully the nation’s central bank just in time for the midterm elections.
NANCY PELOSI CAN AFFORD TO IGNORE INFLATION, BUT MOST VOTERS CAN’T
With inflation at the highest rate in 40 years with little sign of abating, the Fed has engaged in its fastest rate hike campaign since 1988. Although it may still be too little — with an 8.2% CPI rate and nominal interest rates not yet at 4%, real interest rates are still far too negative — and laughably too late, the Fed’s overt and demonstrable commitment to see quantitative tightening through despite market apoplexy is solely responsible for the greenback’s once-in-a-generation rebound. In short, the Fed is pretty much the only entity in Washington that’s doing a damn thing to bring down inflation.
Naturally, Democrats are mad about this.
Sen. Elizabeth Warren defied Biden just weeks after he authored his Wall Street Journal piece promising to respect the Fed’s independence. In July, the Massachusetts senator accused Fed Chairman Jerome Powell of putting “millions of Americans out of work without addressing high prices.” Unemployment has held constant, at a near-record low of 3.5%, while consumer price inflation has slightly decreased from 8.5% to 8.2%.
Then, Sen. Bernie Sanders also jumped on the bandwagon, first lambasting the Fed for “hurting” the situation and now calling on Powell to halt rate hikes.
Worst of all and most politically transparent is Sen. Sherrod Brown (D-OH), who used his position as head of the Senate Banking Committee to browbeat the Fed further. In a letter to Powell, Brown challenged the Fed chairman’s previous commitment to prioritizing inflation, implying that he must weigh his “responsibility to promote maximum employment” equally.
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As anyone who lived through the Volcker era knows, killing inflation requires the short-term pain of highly destructive medicine, monetary tightening, for the sake of long-term economic stability and the preservation of the greenback as the world’s reserve currency. But unlike the Volcker era, when the Reagan administration got in line and ensured that fiscal policy worked in tandem with the Fed, today’s White House and Congress clearly have zero intention of making the Fed’s job any easier. Hence, Biden giving a generation of philosophy Ph.D.s and attorneys student loan bailouts at the expense of literally everyone else.
The rest of the president’s party trying to bully the Fed into skipping a few doses of antibiotics so the economy can try and rally just in time for the midterm elections is simply the cherry on top.
