The Republicans’ positive plan
Nearly everyone knows that inflation is a problem, and that there are various proposals to solve it. However, some Republicans this year have been spouting a conspiracy theory: that the U.S. Federal Reserve is waiting until after the November 2022 midterm elections to raise interest rates, in order to help President Joe Biden and the Democratic Party. While this is just the latest in a long line of right wing conspiracy theories about the Fed, this particularly silly theory can be easily debunked a few steps:
–The current Federal Reserve Board Chairman is Republican Jerome Powell, who was appointed by Donald Trump. This fact alone should be enough to destroy the conspiracy theory. Moreover, of the seven Governors on the Fed’s board, three are Republican, which is normal during a Democratic administration. And in addition to Powell, these other Republicans were also appointed by Donald Trump. Given that the Fed Board’s votes to raise interest rates this year typically have been unanimous, one would have to believe the truly ludicrous theory that these Trump appointees are voting to help Biden and the Democrats.
–As indicated above, the Fed has been raising interest rates all year long. The Federal Funds Benchmark rate, which started at .25 percent early this year is now 3-3.25 percent, enough to sharply raise mortgage, auto loan and other rates. So if the plan was to delay rate increases until after the election, the Fed has failed miserably.
–Inflation is a worldwide problem, caused in large part by factors such as COVID, the resulting supply chain issues, and Russia‘s invasion of Ukraine. Other countries have inflation that is as high or higher than the U.S., and, no surprise, those countries’ central banks are also raising interest rates to try to bring that inflation down. It’s the textbook response to inflation.
–The latest inflation report shows that U.S. inflation remains high. Accordingly, economic analysts and pundits are almost unanimous in stating that of course the Fed is going to raise interest rates again the next time it meets. And when is such meeting? In November. Please repeat after me: correlation does not equal causation.
–Even if the Republican theory were true, that the Fed is somehow delaying or avoiding interest rate increases until after the midterm elections (and again, it’s a false and silly charge), that would hardly help President Biden and the Democrats. On the contrary, the point of such interest rate increases is to try to bring down inflation (for example, by lowering demand for consumer items that get financed, like houses, cars and appliances, as the cost of such financing gets raised). So if the Fed delayed the interest rate increases, that means inflation stays stubbornly high. Such high inflation certainly doesn’t help the Democrats. If it did, Republicans would not have been attacking President Biden and the Democrats over it constantly for the past two years.
Will all of these facts and all of this logic do anything to sway Republican minds? That’s doubtful. The Republicans will simply move on to another conspiracy theory that suits them.
Photo by Mike Licht, used under Creative Commons. https://is.gd/DybVlV
