Nothing would guarantee Republicans victory in 2024 more than a recession next March.
And the Federal Reserve Board seems on course to make it happen.
The Fed has now raised interest rates 10 times, pushing them over 5%. The justification is that limiting new borrowing will result in less development, fewer jobs, lower wages,and less buying, aka, a recession. With less demand pushing prices up, inflation should end.
Raising and lowering interest rates is the one tool the Board has to control inflation. Sometimes it works; sometimes it doesn’t.
Economist and former Secretary of Labor, Robert Reich contends that, at this stage, it’s obvious that higher interest rates won’t stop this inflation.
The shortages are over..“Supply chains have returned to normal. Freight-trucking prices peaked in spring 2022 and since have tumbled close to pre-pandemic levels…Prices for raw goods have also dropped from mid-2022 highs.
“...customers have used up whatever extra money accumulated during the pandemic.”
Reich contends that greed is driving this inflation. Corporate leaders now figure they can raise prices and the public will blame the economy, not them. His evidence? Corporate profit margins rose from about 10% in 2019 to 15% last year–”their highest level since 1950.”
His solution? The Justice Department needs to be more assertive in busting up monopolies “when three or fewer corporations have more than half the sales of a particular market.”
The laws are there, but the will has not been. That disappeared during the 1980s as Japanese monopolies became more competitive in the international market. Maybe only a national monopoly could really compete with another national monopoly? And was it really a monopoly if there was competition from a company in another nation?
AT&T’s breakup in 1984 was proof that our government could break up entities that were larger than most countries. But nothing on that scale has happened since.
The decade from 2010-2020 saw the rise of companies solely dedicated to creating mergers. By 2022 the four biggest had managed 500 such deals. Some mergers were challenged and stopped by the Justice Department or the Federal Trade Commission–among them US Airways and United Airlines and Nasdaq and the New York Stock Exchange. But a surprising number were not challenged.
Shortages during the COVID-19 pandemic demonstrated just how limited the number of suppliers is. There are dozens of brands of toilet paper–but most are made by Procter & Gamble, Kimberly Clark, and Georgia-Pacific. Ninety percent of all baby formula in the U.S. is produced by Abbott, Perrigo, Nestle SA and Mead Johnson.
The Biden Administration has been stepping up the challenges both to mergers and monopolies. It has no power, however, to stop the Federal Reserve Board from increasing interest rates. Members are appointed by the president, but serve 14-year terms and report to Congress.
Meanwhile, Republicans in the U.S. House are threatening to throw the economy into chaos next month. Senate Minority Leader Mitch McConnell is willing to pass an increase in the debt ceiling without demands. But House Speaker Kevin McCarthy, who conceded control to extremists in order to get his position, has pushed through a bill requiring unspecified cuts of $3.2 trillion over 10 years.
Yes, this would require cuts in programs benefiting police, fire fighters, Federal employees, healthcare, etc., which McCarthy claimed his plan wouldn’t cut. It’d also cut a trillion in clean energy support, student loan forgiveness, and IRS staffing.
Apparently, some Republicans don’t agree that they’d benefit more from a recession that they can blame on Democrats than from an international economic crisis undermining our entire government.
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