All eyes turned to the Fed Wednesday.
That’s what I was supposed to write. In reality, the April FOMC was a placeholder — “nothing to see here” in the truest sense of the phrase. There was something to hear here, though. Jerome Powell subjected himself to the usual post-meeting interrogation. Remember: It was his idea to do the pressers after every meeting.
Although nobody managed to extract a verbal misstep, someone did ask about the tent cities. And about house prices, which are probably a bubble. No one (that I heard anyway) asked about food prices, even though we’re on the brink of a 2010/2011 redux (figure below).
Soaring global food costs could destabilize fragile countries already struggling to cope with the myriad inequities created by the pandemic. Americans should sympathize. After all, just 12 months ago we were an unstable, fragile country struggling to cope with myriad inequities during a pandemic. Thanks to plant closures, we experienced big surges in (some) food prices too.
Powell generally deflected questions around politics despite the tweaked language of the Fed’s mandate being overtly political. On the same set of familiar excuses (“That’s Congress’s job”) he habitually dodges making prescriptive statements about fiscal stimulus while simultaneously saying that in his view, and in the Committee’s view, more spending is needed to “right” myriad “wrongs,” some of which were ironically exacerbated by the last decade of Fed policy. Funny how these things come full circle.
“There are no political considerations. These are now mentioned by the Fed – but I haven’t heard ‘labor versus capital’ from them, or what’s needed to do something about it, when they’re happy to expound on so many other areas – in-between pushing up stock and house prices,” Rabobank’s Michael Every wrote Wednesday. “Yet politics and labor and capital are the only real games in town right now.”
One person who was poised to address politics Wednesday was Joe Biden. And that’s fine because… well, because as much as America’s Florida-exiled Dear Leader swears it isn’t the case, Joe is President.
Biden’s American Families Plan will pair $1 trillion in new spending with $800 billion in tax cuts and credits for low-income households and the middle class. And these will be real tax cuts and credits for lower- and middle-income Americans, not the kind that are only brought up ahead of the midterms, when the GOP needs to remind Trump’s base why they support a billionaire who favors gilded hotel suites over double-wides. Just about the only thing Trump had in common with his base was multiple bankruptcies. Joe wants to help folks avoid those — just maybe not his predecessor.
As Bloomberg summed up, “the plan would make pre-kindergarten and community college free across the country, extend the child tax credit through 2025 and make permanent an expansion of the earned income tax credit to childless adults with low incomes, provide direct support to families for child care, finance teacher training and create a national paid family leave program.”
Good luck explaining to someone less fortunate than yourself why any of that is bad. In fact, good luck explaining to anyone why any of that is bad.
Let’s say you’re worth $50 million (a “nice” round number, for argument’s sake). Your son wants to go to community college because he’s heard that, in reality, four-year liberal arts degrees are often a total waste of time, not to mention a waste of your money, which you “earned” by paying people $9/hour to do all the stuff you don’t want to do. On Joe’s plan, your son can go get a two-year degree, learn a skill that’s actually useful in today’s economy and it won’t cost you a dime. Are you going to complain? Sure, you could pay for community college with the extra twenties and hundreds lost in your couch cushions, but you didn’t get rich by spending money you didn’t have to spend, did you?
But it’s not all good news for you (the wealthy household). The top tax rate for individuals would go back to 39.6%, capital gains taxes would rise and, perhaps “worst” of all, the administration will give the IRS more money for enforcement. (“Get to the choppa! We’re going to our island!”)
“The president has been clear that our tax system is broken when a hedge fund manager making hundreds of millions of dollars is paying taxes at a lower rate than the janitor working in his office or the housekeeper at his mansion,” White House senior adviser Anita Dunn said Tuesday, in a memo.
Who wants to argue? (The hedge fund manager.)
Who’s going to argue? The GOP who suddenly cares about how we’re going to pay for things. They are going to get on their propaganda machine and spin tails about how all of this spending is devaluing your dollars and creating inflation and how your grandchildren won’t be able to afford hamburgers because Joe Biden hates them. Rinse, repeat, that has been politics in the US for 20 years.
+1
I have a better idea. Send all the money to me, I’ll invest it and everyone else will be better off.
I wonder how much of this will come back to the federal government in subsequent taxation. After all it seems to me if you give a tax credit for families they spend it on the family, with most of that money spent in the local economy much of it will come back to the federal government in subsequent taxation.
It seems to me somewhat less will come back from free kindergarten or free community college. However who’s to know at my level, will those community college students be saving their money for the next two years of college or will they be spending it at the local bar.
To make this sort of policy sustainable I think it is necessary that economists study this question and determine the true cost of this plan to the treasury versus McConnell’s tax cut plans.
This pendulum is swinging with a lot of momentum… You can change the momentum and speed but the moment arm is not elastic (as we speak). The return motion likely starts with equal vigor and perhaps around the mid term Election cycle . The MMT’ers have been silent because as H … says ‘ it is reality ‘.. Proof of the pudding is ,however in the Eating. Too many people on the same side of the boat ( me included ), but carefully and selectively.