THOMAS MCARDLE was a White House speechwriter for President George W. Bush and writes for IssuesInsights.com.
Thomas McArdle
No Fed Rescue
The Federal Reserve will not be saving the Democrats
sked on feb. 11 by nbc’s Lester Holt about the nation’s worst-in-40-years 7.5 percent consumer inflation, President Joe Biden claimed, “The reason for the inflation is the supply chains were cut off, meaning that the products, for example, automobiles—the lack of computer chips to be able to build those automobiles so they could function; they need those computer chips. They were not available.” And one of Biden’s most oft-repeated talking points on inflation is that “17 Nobel laureate” economists “have written a letter affirming that” his Build Back Better multitrillion-dollar spending extravaganza “will reduce inflationary pressure in the economy.” To the contrary, one of the letter’s signatories, Harvard economics and mathematics professor Eric Maskin, warned that Biden’s spending proposals would only “have the potential to reduce inflationary pressure in the longer term because they should expand productive capacity and therefore supply,” but that “it is much harder to say what their effect on inflation might be in the short to medium term.” Unsurprisingly, the president is also taking the opportunity, irresistible to the left, to blame the private sector for inflation, in particular the fossil fuel industry. In November 2021, he wrote Federal Trade Commission Chairwoman Lina Khan to claim “mounting evidence of anti-consumer behavior by oil-and-gas companies”—a calculated distraction from his policies that make oil and gas more costly by restricting, or adding to the expense of, the production of fossil energy within the United States. It wasn’t long before left-leaning Harvard economist, Clinton Treasury secretary, and Obama National 44 I N S I G H T Feb. 25–March 3, 2022
Economic Council chief Lawrence Summers poked Biden with the pointed tweet that “the emerging claim that antitrust can combat inflation reflects ‘science denial,’ and added that “there are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them.”
The president is taking the opportunity, irresistible to the left, to blame the private sector—in particular, the fossil fuel industry—for inflation. On Feb. 17, an even more noxious skunk crashed the White House’s garden party. High-ranking Obama Treasury Department official Steven Rattner penned an op-ed in The New York Times accusing Biden of deceit with regard to inflation. The president’s contentions were “simplistic and misleading,” Rattner wrote, supply chain issues being “by no means the root cause of our inflation.” According to Rattner, “most of our supply problems have been homegrown: Americans have resumed spending freely, and along the way, they have been creating shortages akin to those in a shopping mall on Black Friday.” That increased spending is the consequence of “vast amounts of government rescue aid.” But cock an ear in the White House briefing room and you’ll hear press secretary Jen Psaki blaming, naturally, Republicans in the Senate, some of whom are balking at confirming Biden’s nominees to the Federal Reserve Board. Psaki marveled at the wizardry the Fed can perform. “It’s never been more important to have confirmed leadership at the Fed
to help continue our recovery and fight inflation. And, obviously, they have a unique role to play, an important—a vital role to play as it relates to inflation.” Biden’s Fed nominees Lisa Cook, Philip Jefferson, and Sarah Bloom Raskin claim that fighting inflation will be their top priority if confirmed, alongside current Fed Governor Lael Brainard being elevated to the vicechair slot. But Raskin is the wife of Rep. Jamie Raskin, the Maryland Democrat who was the lead manager of Trump’s second impeachment last year; she has devoted most of her energies to promoting green energy and harassing oil and gas interests, while Cook and Jefferson’s priorities have to date revolved around “wokeness” and race. Dartmouth monetary economics professor Andrew Levin, who has advised the Fed for many years as well as numerous foreign central banks, told the prestigious Shadow Open Market Committee on Feb. 11 what kind of dramatic tightening in Fed policy it would take to make a real dent in inflation, and it’s clear that such drastic action can never be expected from Biden’s appointees. “Price stability cannot be achieved by following an ad hoc ‘meeting-by-meeting’ approach to Federal Open Market Committee (FOMC) decisions and communications,” Levin warned. “The FOMC needs to move promptly to a neutral stance to ensure that it doesn’t keep adding fuel to the inflationary inferno.” Over the next year, reaching such a stance would “almost surely involve raising the federal funds rate” (the short-term interest rate banks charge in loaning money to each other) “to 4% or 5%, and perhaps even further.” So it will not be the Federal Reserve that comes over the hill in the nick of time to save Democrats from their lies and their extreme policies this November.
