Federal Reserve Chairman Jerome Powell — who recently won a second term from President Joe Biden despite spectacularly failing to prevent painful inflation — finally admitted his botched approach to controlling inflation could plunge America into a recession.
“It’s not our intended outcome at all, but it’s certainly a possibility, and frankly, the events of the last few months around the world have made it more difficult for us to achieve what we want, which is 2 percent inflation and still a strong labor market,” Powell told the U.S. Senate Banking Committee Wednesday. “Of course, we’re not trying to provoke and don’t think that we will need to provoke a recession. But we do think it’s absolutely essential that we restore price stability, really for the benefit of the labor market as much as anything else.”
Powell tried to hedge his bets, saying that “I don’t see the likelihood of a recession as particularly elevated right now,” and passed the buck, claiming “You should know that no one is very good at forecasting recessions very far out. No one’s been able to do that regularly.”
He finally admitted that inflation “obviously surprised to the upside over the past year, and further surprises could be in store,” and said his team “will need to be nimble in responding to incoming data and the evolving outlook.”
Edward Conard, visiting scholar at American Enterprise Institute, told me that the inflation should not have surprised anyone.
“How could you not expect inflation after you borrow trillions of dollars and give it to consumers to spend, while you pour on trillions of dollars of monetary stimulus, which you continue to expand long after it was obvious that the pandemic was not causing a recession and real estate was booming?” Conard, who I researched for in 2014, said. “Dems understand that spending matters more than taxes. If you consume something, eventually someone has to pay for it one way or another.”
During his testimony, Powell gaslighted American families, claiming that “the U.S. economy for now is strong. And spending is strong, consumers are in good shape. Businesses are in good shape.”
Powell’s claim flies in the face of consumer sentiment plummeting in June to the lowest level ever recorded in the 70-year history of the University of Michigan index. It is a stunning figure, lower than what we saw in the tumultuous days of the COVID-19 pandemic.
The index fell to 50.2 from 58.4 in May — already a recession-level reading — and was far below the 58.1 projected by economists.
Businesses share consumers’ sentiment: “More than 60% of CEOs expect a recession in their geographic region in the next 12 to 18 months, according to a survey of 750 CEOs and other C-suite executives released Friday by the Conference Board, a business research firm,” The Wall Street Journal reported last week. “An additional 15% think the region of the world where their company operates is already in a recession. In late 2021, 22% of CEOs surveyed by the firm reported seeing recession risk.”
Ex-Treasury Secretary Larry Summers, the Democrat canary in the coal mine warning his own party against inflation in 2021, said in a London speech reported by Bloomberg, that our economy needs “five years of unemployment above 5% to contain inflation — in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment.” Unemployment currently stands at 3.6%.
Also maddening about today’s hearing was that over and over, Powell refused to offer support for fiscal policies that will cut inflation, boost productivity and supply.
“We’re very focused on sticking to our knitting and carrying out the task that we’ve been assigned,” Powell said at one point, and later at different points, “I swore off getting involved in these fiscal debates … it’s really not our job … I don’t think it’s appropriate for the Fed or for me to be reaching out into areas of policy that are not assigned to us.”
“It’s not up to us to comment on that sort of thing. We have a very specific job, and precious independence, to carry that job out,” he said. “And I think the other side of that is, stick to that job, and our job is maximum employment and price stability.”
By refusing to connect stopping wasteful government spending to controlling inflation, Powell is failing yet again.
Carrie Sheffield is a senior policy analyst at Independent Women’s Voice.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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