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Why 'Bidenomics' Failed
With unemployment standing at 3.7 percent, down from 6.3 percent when President Biden took office, and labor force participation up 1.5 percent over the same period, it's hard to imagine American labor has been disserved by the President's fiscal policies. Macro-indicators show economic growth is strong and a recession unlikely. A year ago, almost every economist forecasted a recession for 2023, but real GDP stands at 4.9 percent for Q3, and Q4 will be strong as well, although likely lower. For
Biden Should Tap Seth Carpenter to Replace Vice-chair Brainard
As former Vice Chair of the Federal Reserve Board Lael Brainard takes up her role as head of President Biden’s National Economic Council (NEC), the president would be wise to tap Morgan Stanley’s global chief economist Seth Carpenter to replace her. Carpenter is one of the few in contention for the position that checks all the requisite boxes—not only those required to ensure a successful Senate confirmation, but also those which can appeal to the Democratic party's concerns about the dearth of
The Sociopathy of Failed Stimulus Negotiations
Hundreds of thousands are dying, millions are in financial pain, yet Congress fails to do anything to help Americans in their time of need. We have a sick population and a failing economy. Fighting Covid is nearly an impossible task without a vaccine, mask mandates, or lockdowns — made much harder by the Commander in Chief holding rallies that most health experts believe constitute super-spreader events. However, fixing the dumpster-fire that is the Trump economy is actually easier than we think
Now Isn’t the Time for an Austere IMF
While the developed world is beginning to show signs of economic improvement, there are still fractures within the global economy that pose significant spillover risks to many markets around the world. One of note is the strain on emerging and frontier market economies as they deal with the challenges of Covid-19. Since these countries typically have a harder time attracting foreign funding—especially during economic downturns—the combination of declining export revenue from shutdowns and quaran
The Selective Myopia and Political Convenience of Inflation Dynamics
Public discourse surrounding the US Federal Reserve has been mired as of late by widespread discontent with regard to the series of interest rate hikes that have taken place over the past eight months. The common theme running through these critiques has been that the Fed, through its leadership on FOMC, has brought much difficulty upon the American economy. Whether it’s those making arguments that interest rate moves have threatened growth while in no way improving prevailing inflation, or that
Republicans Use Coronavirus Relief Bill to Restrict Fed Autonomy
Over the last week there have been plenty of articles outlining just how inadequate the latest round of stimulus is, given the turmoil millions of Americans have endured over the last nine months. While I agree it’s embarrassing our leaders think a $600 stimulus check is sufficient assistance for those who have been adversely affected by the Covid-19 economic slowdown, I’m not here to belabor that point. We all know the bill was laughable. What’s really sadistic, though, is how certain Republica
Biden's Infrastructure Plan Does More Than Just Rebuild the Country
President Joe Biden is doing something economists and policy wonks have been begging legislators to do for years yet no party has been able to get it done: pass an infrastructure bill that actually rebuilds the country and creates thousands of jobs in the process. For those of us who live in the DC area, each year we get to witness the excitement around something called Infrastructure Week. Infrastructure Week is a five-day push to address the dire state of our nation's infrastructure—whether ph
What Frontline Missed: The Counterfactual of Fed Intervention
PBS Frontline released a documentary Tuesday, The Power of the Fed, and it has everyone talking—and not just those who work in finance. Many friends and colleagues have reached out to me for my interpretation of the program, so I thought I would write a quick post about what I think about it. Let me first say that I encourage all of The Demand Side readers to watch the program because PBS is great, and the special is very informative and easily digestible for those less familiar with the inner w
For Some, It’s Time to Default
As governments remain focused on the current health crisis and finding ways to help consumers through what will be a Great Depression-sized quagmire that could leave lasting effects for decades to come, one issue that’s been largely ignored is the threat unserviceable sovereign debt poses to the global economy. Ever since the Great Recession fostered a new normal of low rates and easy access to credit, there has been a growing concern among economists that a prolonged era of cheap, free flowing
Supply-Side Economics is Dead
Covid-19 has killed supply-side economics. I'm sorry, Friedmanites, but it's true. The idea that as long as we lower taxes, cut regulations, and lower interest rates, any economy can recover from any recession is something that should have gone the way of the iPod, but for some reason it has lingered in the ivory towers of the University of Chicago, conservative think tanks, and those altogether detached from reality. Until now. The reason I say this is because over the last six months liberals
$2 Trillion Isn’t Enough. We Need a Money Financed Fiscal Program.
Anyone who thinks the recently passed $2 trillion stimulus package is enough to stem the economic fallout from the Coronavirus is living in fantasyland. The United States produced almost $18 trillion in personal income in 2019; $2 trillion won’t put a dent into solving the myriad of problems the country is likely to face over the coming months. Not only will unemployment reach levels not seen since the Great Depression, but small businesses and individuals will be forced into bankruptcy if our l
Clarida is Right; Now Isn't the Time to Tighten
In an interview on CNBC's Closing Bell last week, Federal Reserve Vice Chairman Richard Clarida made clear to viewers that now isn't the time to begin tapering the Fed's easing policies and certainly not the time to consider an overall tightening by raising the policy rate above its current range of 0-25 basis points. With inflation concerns occupying the majority of economic discourse, Clarida maintained the Federal Open Market Committee’s (FOMC) wait-and-see policy approach by saying, "We’re s
Congress’s Sleight of Hand
On Tuesday of this week, President Biden signed the Inflation Reduction Act into law. A piece of legislative text ostensibly geared towards countering advances in the price level and forcing large corporations to pay a minimum income tax, the Act will likely fail to gain much ground on either front—though it isn’t for without trying. It is well-known in Washington that a commonly used tactic on Capitol Hill is legislative misdirection. Policymakers hone in on a key issue facing the American peop
Coronavirus Proves Labor Indispensable. Basic Income, Too.
What would you say are the lessons of the past two months? Is it that we should all be more careful who we come in contact with, being more cognizant of our surroundings and those who occupy our daily lives? Or is it that we should be prepared to be unemployed at a moment’s notice, feigning loyalty during the 9 to 5, but in the back of our minds knowing our employers will terminate us as soon as things get rocky? Maybe, both. But the thing that stands out to me is something less harrowing, somet
The Fed's New Approach to Price Stability
In 2012, the Federal Reserve Federal Open Market Committee (FOMC), led by former Federal Reserve Chairman Ben Bernanke, formally implemented an annual inflation target of 2 percent for the US economy. While the Fed had been loosely targeting inflation since its adoption of the 1977 dual mandate of price stability and maximum employment, with price stability generally understood to be annual inflation somewhere in the neighborhood of 2%, this was the first time the bank outlined a hard target to
Abolish the Debt Ceiling
Much talk in recent weeks has been about the need for Congress to once again raise the debt ceiling, otherwise risk widespread default on US government debt. If you are experiencing some déjá vu, you are not alone. Debt ceiling standoffs have become a staple in American politics in recent decades, with one party using the debt ceiling to play the proverbial game of chicken with the US economy, and the other hoping a deal is hammered out before it’s too late. But why exactly do we have a debt cei
Biden and the Real Worst. Generation. Ever.
For those who have seen the opening episode of Aaron Sorkin’s The Newsroom, one of the first things that typically comes to mind is the line: “You are a member of the Worst, Period, Generation, Period. Ever, Period!” In an elitist diatribe about millennial political apathy, protagonist Will McAvoy, a news anchor played by Jeff Daniels, tells a quixotic college sophomore quite tersely that she is a member of the “Worst. Generation. Ever,” and that her question of “what makes America the greatest
Give People Money; Supply-side Measures Won't Work
It is becoming clear that implementing a payroll tax cut to fix the economic issues associated with the Coronavirus is a terrible idea. Yet somehow I'm not surprised that this is what is being considered. History offers plenty of evidence of how Washington always seems to arrive on the most ineffective policy solution when drafting fiscal policies dedicated to stimulating the economy. But thanks to a vigilant Treasury Department, there are hints that we may actually get it right this time. Presi
It's Time to Accelerate Tapering
Inflation numbers released last Friday by the Bureau of Labor Statistics showed an annual increase of 6.8% in the Consumer Price Index, a figure larger than any month on record since 1982. This number, in and of itself, is no cause for alarm; however, when we examine it within the larger economic context—in particular, the fact there have been six straight months of higher-than-expected inflation—an alarming picture begins to form, and when we juxtapose that picture with the one the Fed forecast
This Time Really is Different
To combat what seems like a prolonged period of runaway inflation, the Federal Reserve has stated it plans to raise interest rates six times over the course of this year. While this certainly came as a shock to investors, especially those who had hoped for a continuance of the zero interest rate policies from the Fed, it does not signal a recession is imminent, as many have suggested. The media has enjoyed throwing around the statistic that the Fed has forced a recession in eight of the last nin
A Permanent Minimum Wage Solution
With the Biden administration starting to hit its stride in its second week, putting forth policy proposals that, for the most part, are good for the country, I feel it’s necessary to step back and take a breath. It’s been a minute since policy coming out of the White House has been worthy of debate, and many of us—policymakers included—are having a little trouble getting our bearings. It goes without saying there is plenty that needs to be done by the Biden administration in the coming months.
What Would the Addition of Judy Shelton Mean for the FOMC?
In a 13-12 vote Tuesday, the Senate Banking Committee approved Judy Shelton, a wildly controversial economist and long-time supporter of Donald Trump, to a seat on the Federal Reserve Board of Governors. While the outcome of the vote came as little surprise to those inside the beltway (the president has been trying to get Dr. Shelton on the Board for some time now), what is surprising is how much her ideas depart from 21st Century economic thinking. For instance, as recently as 2008, Dr. Shelton