EDITORIAL: The heavy toll of Biden’s overspending

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The Federal Reserve has thrown another anvil on the US economy in its continued effort to dampen the raging effects of inflation. Thanks to President Biden’s 2-year spending spree, fiscal balance can only be restored by inflicting a beating on American workers.

Federal Reserve Chairman Jerome Powell led Fed policymakers to unanimously opt for a widely expected three-quarter point hike at the end of their meeting last week. The fourth consecutive such hike takes the central bank’s benchmark rate to a range of 3.75% to 4%.

Mr Powell warned in a statement that future hikes would likely meet the Fed’s 2% inflation target, but he hinted that further increases could ease due to “the lags with which monetary policy affects economic activity and inflation, and economic effects and financial developments. Americans can only hope his intuition comes out on the money. So far, the steepest rate increases in four decades have done little to rein in inflation, which has fallen only slightly from a high of 9.1% in June to 8.2% in September.

In addition to the year-over-year costs of basic necessities such as food, up 11%, and energy, up 20%, the Fed’s relentless rate hikes have caused skyrocket consumer borrowing costs. Mortgage rates that were below 3% two years ago have jumped above 7%, adding more than $600 to the monthly payment for an average home.

Given inflation’s stubborn persistence, the Fed’s painful battle is likely far from over. Older Americans can only wince when they recall a similar time when then-Fed Chief Paul Volcker took the quick and dirty approach to crushing inflation in the early 1980s. After peaking at 14.8% in March 1980, Mr. Volcker brought inflation down with successive rate hikes that peaked at 20% in June 1981. he US economy was putting Americans out of work, with unemployment reaching 10%.

Senate Banking Committee Chairman Sherrod Brown, an Ohio Democrat, pleaded with Powell in a letter last week not to use such extreme measures. “We must avoid having our near-term advances and strong labor market overwhelmed by the consequences of aggressive monetary actions to reduce inflation, especially when Fed actions fail to address its key drivers. “, Mr. Brown wrote.

Mr Biden and his fellow Democrats have spent hugely on wealth distribution schemes under the banner of coronavirus sanitation – even as the pandemic waned. Yet they argue that neither Biden’s $4.8 trillion frenzy nor his war on the fossil fuels that fuel the economy are the ‘main drivers’ of inflation, but rather the global pandemic and invasion. of Ukraine by Russia. Nonsense. When the world’s largest economy sneezes, the entire planet catches a cold, not the other way around.

Only cruel hearts would welcome a victory over inflation resulting from a deep recession and rising unemployment. If the Federal Reserve lost its cool and suspended its rate hike campaign, persistent inflation would eat away at the substance of Americans year after year.

As the Federal Reserve gradually cuts higher interest rates on inflation, Americans are paying dearly for Mr. Biden’s profligacy. On Election Day, poorer voters have the opportunity to treat the president’s party back.

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