Filed under: Capitalism, Economy, Free Markets, Politics, Progressives, Regulation, The United States, Unemployment | Tags: A Troubled Economy, Federal Reserve, Leftist Economics
The Federal Reserve’s quantitative easing seemed like a good idea at the time. Cheap interest rates would let businesses borrow and grow and hire.The Wall Street Journal says household and nonprofit net worth climbed to $85.7 trillion
Economists had hoped that rising worth in U.S. households could induce — through what are known as wealth effects — enough spending and confidence to bring about a more robust economic recovery. That logic helped underpin the Fed’s decisions to hols interest rates near zero for nearly the past seven years, and to engage in repeated rounds of asset purchases, known as quantitative easing.
But while the value of U.S. assets has shot upward in recent years—stocks have reached new highs and home values have regained much of what was lost in the housing bubble’s collapse—economic growth has been sluggish, and many households have seen little of this wealth flow into their paychecks.
The American Interest says ‘Low Interest Rates Mask the Effects of Job-Killing Policies.’ “While the Fed’s quantitative easing has not led to the consumer price inflation that many feared, it has led to asset price inflation. Job growth, not asset price inflation, is the best way to promote economic growth.”
To grow the economy, cheap interest rates are not going to work as well as reforms that make business formation and job creation more attractive. Yet Democrats these days have ever-lengthening lists of job-killing policies they want to enact, from tighter environmental regulations to dramatic minimum wage increases (especially in cities where unemployment is high) to tax increases. Paradoxically, that leaves liberals cheerleading for Fed policies that increase inequality and concentrate wealth because only ultra low rates (or truly massive deficits, which can’t be rammed through a GOP Congress) can mask the effect of left-wing microeconomic policies on the economy as a whole.
The Pizza shop owners have been ordered to list all the ingredients in each pizza with the calorie count, because people are too fat. They have also been ordered to comply with the newly raised federal minimum wage, because no one can raise a family on the minimum wage. And just how do they pay for all that?
Hospitals have been ordered to computerize every examining room so they can be centrally programmed to store all the patient’s information so it can be shifted between hospitals and the government to reduce the cost of health care.¹ A tax has been levied on every piece of medical equipment from the examination table to the mammogram machine to the disposable gloves, and the sterile swabs. That is also expected to reduce the cost of health care.
That’s just two tiny examples of the wrongheadedness of Democrats and their economists. Noble intent + stupid idea does not equal an improving economy, and yet here we sit after 7 very long years.
They are so intent on control and more closely directing all economic activity in the interest of greater “fairness” that we have reached a point where the Federal Reserve seems to be terrified at the possibility of what might happen if they raised interest rates by a quarter of a percentage point.
¹ This has largely been done, at great expense. Hospitals and clinics cannot talk to each other nor to the federal government. Each was separately programmed and they cannot communicate. However, just as was warned, medical identities and records are being stolen, and recovering from such a theft can cost as much as $15,000.
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