The Fed and Biden Focus on Everything but Fixing Inflation

Heritage Explains

The Fed and Biden Focus on Everything but Fixing Inflation

The Federal Reserve has utterly failed in its mission to achieve price stability and preserve the dollar’s value.

We all know American families are being crushed by four-decade high inflation, but the elites remain preoccupied with the likes of diversity hiring and student debt transfers from elites to every day taxpayers. It seems like every time we turn on the TV, we hear the Biden Administration and voices at the Federal Reserve talking about everything but fixing inflation. So what do we do about it? On this episode of Heritage Explains we talk about how to counter the D.C. elite narrative, and the steps we should be taking to fix this inflation problem once and for all. 

Tim Doescher: From The Heritage Foundation, I'm Tim Doescher, and this is Heritage Explains.

James Taylor: (singing)

President Biden: Exactly four weeks ago today, I signed the Inflation Reduction Act into law, the single most important legislation passed in the Congress to combat inflation and one of the most significant laws in our nation's history in my view. We're going to lower prescription drug costs, lower health insurance costs, lower energy costs for millions of families. Today offers proof that the soul of America is vibrant, the future of America is bright, and the promise of America is real. It is real. It is real.

>>> Media Elite Play Identity Politics While Americans Suffer From Fed’s Monetary Moves

President Biden: Together, we'll champion investments that lift all American working families, provide for the future for our kids. I know it's been a hard few years in this country. The challenges we face are among the most difficult in history. But I have to tell you as I stand here today, and a lot of you know me well, I am more optimistic than I've ever been in my entire life about America's future. We just have to remember who we are. We are the United States of America. There is nothing, nothing, nothing we've ever set our mind to, nothing that we've not been able to accomplish, nothing beyond our capacity.

James Taylor: (singing)

Doescher: That's audio taken from the celebration of the Inflation Reduction Act at the White House. At the ceremony, they talked about how great things are and will be in America because of their work.

James Taylor: (singing)

>>> Heritage Explains: The Real Story Behind Inflation

Doescher: But as Biden, the Democrats, and James Taylor took a victory lap celebrating their work, you have to ask yourself, are people at home feeling the same way? Well, then this happened.

Clip: Inflation isn't going anywhere. And the average American family, according to Moody's, is now spending $460 more every single month in order to deal with these price increases. And you're seeing it in inescapable areas, like grocery prices up 13.5%, shelter costs, those include rent prices, up 6.2% from a year ago, and medical care services up 5.6% from a year ago. Wages aren't keeping up. The Federal Reserve is doing everything in its power to aggressively fight inflation. But what this really underscores is how hard that is to do when it's deeply embedded in the economy.

Doescher: That's right, inflation is still a huge issue. And it's making all of us poor. Of course, it is. Even some Democrats have shied away from calling it the Inflation Reduction Act. But as elites in D.C. continue to celebrate, American families are suffering.

Doescher: So when I read this piece by our Heritage colleague, EJ Antoni, titled Media Elite Play Identity Politics While Americans Suffer From Fed's Monetary Moves, I had to bite. It really resonated with the contrast we just heard above. In the piece, EJ responds to a report that the Federal Reserve, or the organization arguably responsible for handling inflation, is focusing on diversity hires and other woke policies. So what does this have to do with fixing inflation? On this episode, we're going to talk with EJ about this, the culture D.C. elites continue to perpetuate, the cost, and what their priorities should actually be. More after this.

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Doescher: EJ, your new piece in the Washington Times calls out the left for placing ideology before struggling families. I think that is a great place to start. The piece is called Media Elite Play Identity Politics While Americans Suffer From Fed's Monetary Moves. Now EJ, we know the economy is bad, and yet D.C. continues to tell us everything is fine. Just watch those White House press conferences, "Hey, we're great. We're coming back. Everything's good." Because this piece is a lot more than economics, you are talking about our culture here, give me a little bit as to what the impetus for this piece was.

EJ Antoni: Well, I think the biggest thing is that if the economy was actually doing well, then that's what people would be talking about, people being in this administration. They would be citing the facts and figures constantly. And instead they're not. They're talking about how they have more black and brown people at the Fed. They're talking about how they have more women at the Fed. I mean, what does it say that we can't talk about the decisions that these people are making, we have to talk about their immutable characteristics, things that can't be changed, and things that frankly don't matter and have no impact on their job performance.

Doescher: It was so funny. I could just see you while reading this piece having to take a couple laps around the office or throwing your hands in the air, pounding the desk, yelling as an economist that you are. I mean, you're in this stuff every day and you know these numbers, and yet we get pieces like this that do nothing to help families.

Antoni: No, it's exactly right. And frankly, if this administration was explicitly trying to be anti-family, and not just the Biden administration, but the Federal Reserve too, if these people were actively trying to be anti-family to destroy this country, I don't know what they would do differently.

Doescher: Yeah.

Antoni: And again, that speaks volumes about their job performance and just how horrific it has been. They are impoverishing people. We are effectively creating an entire generation of Americans who will be doomed to renting for the rest of their lives and will very likely never be able to afford a home, the American dream.

>>> Heritage Explains: Stagflation

Doescher: Yeah. Let me ask you this. I mean, because people would say, "Hey, we have other work to do as well as the basic job of the Fed," which we can talk about that later, which I'm not sure people fully understand what the job of the Fed is. But the left would say, "Hey, we can walk and chew gum at the same time." What's your response to something like that?

Antoni: Well, I would like to see the left either walk or chew gum at all separately, because, I mean, they haven't shown an ability to do a single job correctly. Why would we expect them to be able to do multiple jobs correctly at the same time?

Doescher: I just wanted to get to a little bit of the heart of the work that needs to be done here, EJ, because Powell in Jackson Hole said some pain for households, that's coming because they're fixing, they're fixing to raise those rates, Fed rates, which means we're going to see some headwinds from that. Is that enough? Should there be more done? Can we count on Powell to carry on, carry through with that promise to fix inflation?

Antoni: Unfortunately, Jerome Powell has proven to be nothing if not unpredictable and inadequate to the job.

Doescher: Yeah.

Antoni: So I don't have much confidence in his latest rhetoric that he is going to see this through whatever it takes, although that is what needs to be done. However, it's a shame that the Fed does not acknowledge that they are fixing a problem that they themselves created. They caused the cancer of inflation in this country. And a year and a half ago, I was pleading with them to raise rates and to get things under control, and I and many others were completely ignored. And because of that, the cancer grew.

Antoni: And now, when they finally decide to deliver the chemotherapy and the radiation that's needed to kill that cancer, we now need hot, we basically now need much harder doses of that chemotherapy and that radiation, and it's going to do a lot more harm to the patient in the process. Now, it's still the right course of action. You don't say, "Well, because my cancer is stage four instead of stage one, I'm just going to ignore it." No, you still need to go through that pain. But it would've been a lot less pain had they not caused the cancer in the first place and had they not waited so long to treat it.

Doescher: They just keep printing money, printing money, spending money, spending money. It's that monetary phenomena that Milton Friedman always talked about, and we've covered that here on Explains. What more? We talk about some pain. What does that look like?

Antoni: That looks like a lot of unemployment, jobs losses. It looks like slower economic growth, probably negative economic growth for a while. Nothing good, unfortunately. Now, a lot of that could actually be avoided simply by the government spending less money. Now, what the heck does that have to do with it? The problem that the Fed faces today are these massive budget deficits. And what happens when the Treasury basically is spending money that they don't have, the Fed has to write those checks for them because if they don't, what happens? The loanable funds market, which is basically just money that's available for lending, that will dry up right quick.

Antoni: And so what the Fed has to do is step in and provide that liquidity to the system because if they don't, if the Fed were to just stop overnight, then interest rates would immediately start to rise and we would basically be running out of those loanable funds in the marketplace. And so the deficit spending by Congress is actually really putting the Fed in a corner where they don't have any good options.

Doescher: What is the strategy here? Is it to divert attention? It's very difficult for me to place this in terms of a strategy that the Fed has. And I'm wondering maybe you have a little insight on that.

Antoni: Well, I'm not in their head, thank goodness.

Doescher: Right.

Antoni: But I think it probably boils down to one of only two options. One is it's an intentional attempt to distract people from how bad things are, or two, this is just what these people actually genuinely care about. And like most people when they genuinely care about and are interested in something, they enjoy sharing it with others.

Doescher: Yeah.

Antoni: But I think that point, if that's the case, and I suppose that's really the, I don't know, I don't know what exactly the word is, but it impugns their honor less I suppose to say that versus they're intentionally and maliciously doing this to be deceptive. So let's say the latter is the case though. I mean, that speaks to just how aloof these people are. They are so disconnected from the common man and they are so unaffected by the ravages of inflation that they can focus on things that don't matter. They can focus on things that don't actually affect people's lives. They can focus on things that, frankly, aren't even true.

Doescher: Yeah.

Antoni: It doesn't matter what color your skin is.

Doescher: Yeah.

Antoni: It doesn't matter what sex you are.

Doescher: Yeah.

Antoni: I mean, these people are metaphorically dancing on the grave of Martin Luther King Jr.

Doescher: What would you see as a appropriately competent person for a Fed Board Governor?

Antoni: In terms of who would I pick or what qualifications would they have?

Doescher: What would you see as the things that we should be looking at and their ideology?

Antoni: I would say they have to understand several key principles, not the least of which is the fact that money is debt, as well as the fact that inflation is a tax. It is the most unfair tax of all because it is levied the most unequal of all. It primarily falls upon lower and middle-income people. It is a tax on creditors. And also the fact that inflation by nature of being a hidden tax is a way that Congress relies on the Federal Reserve to cover its budget shortfalls, and that whoever gets appointed needs to have the political will to wash their hands, as Paul Volcker did, and say to the Treasury sell those bonds yourself, I want nothing to do with it.

Doescher: Well, EJ, I really do appreciate this conversation. You're mixing in two very, very complex issues and you're trying to detach them from each other, which is very, very difficult to do. But that's how the left is playing the game right now. And I wanted to tell you, your piece here has really been a good read for me. And I'm going to link to it, folks. So please log on into the show notes. You can find it there and catch up with EJ and I as to our conversation. So EJ, thank you so much for being here with us today.

Antoni: No, thank you for having me.

Doescher: Well, it is so great to get EJ in here. Every time he comes in, I always feel like I connect to complex policy in a very different way. So EJ, thanks again for being in here.

Doescher: Folks, if you want to hear more, if you want to read more, I've linked to EJ's work. Head over to the show notes, you can check that out, same drill as usual. And as always, folks, we appreciate you hitting that like button, sharing us with your friends, leaving us a comment. And also, you can send us an email. John Popp, I like it when people send an email because it's not a public thing. You can say, "Hey, I didn't like how you said this," or, "Hey, you should have said this better," or a nice compliment is always great too. So folks, feel free to email us at [email protected]. That's [email protected]. Of course, we will respond. Michelle's up next episode and we'll catch you then.

Heritage Explains is brought to you by more than half a million members of The Heritage Foundation. It is produced by Michelle Cordero and Tim Doescher with editing by John Popp.