Warren acknowledges at the beginning of the clip there are other factors at play that Powell has no control over, but she doesn’t acknowledge that the legislative branch does have control over, such as price gouging and tax cuts for the rich.
Unfortunately the legislative branch couldn’t act to address those factors because of Manchin, Sinema and the filibuster. Repealing the Trump tax cuts, and even increasing taxes on billionaires would have had significant effect on inflation, but, alas…
Powell really has only one weapon against inflation, and that is interest rates. Historically, the average fed rate runs in the 5-7% range (the rates have been abnormally low since the 2008 GFC, began to creep up, then COVID smacked them down again). Currently, the Fed’s rate is at 4.5%, below the historic average. Powell’s target was originally 5.1%, but since inflation isn’t cooling enough, quickly enough, he may go higher.
Powell’s only mistake was waiting too long to begin hiking rates, so he had to make larger hikes more frequently.
Currently unemployment is at 3.5%, a 50 year low. Only us old boomers have seen it this low before. “Full employment” is considered to be reached when unemployment is at or below 5%. Warren states that, with Powell’s projected hikes, the unemployment rate will rise to 4.6%, putting 2 million people out of work, yet 4.6% is still considered to be “full employment”.
Now, if Powell were to pause hikes, those 2 million people might keep their jobs, but inflation would continue to grow, affecting all 330 million Americans. So the dilemma is: which is worse? Sacrificing 2 million jobs (which may only be temporary as tons of new jobs are being created by infrastructure and manufacturing projects made possible by the IRA, as well as millions of boomer retiring), or risking double digit inflation? (which again, us old boomers remember from the late 70’s/early 80’s)
Which scenario, 4.6% unemployment, or double digit inflation, is worse for Dems in the 2024 election? (The answer should be obvious)
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