The Federal Reserve has been hellbent on raising interest rates to slow the economy. It’s a huge mistake.
You know who bears most of the pain of these rate hikes?
Most of the pain is borne by people who are already struggling to keep up with rising prices: lower-wage workers and the poor.
While the Fed has signaled that its interest rate increases might not be as drastic moving forward, the important thing to remember is that these hikes already fail to address a major driver of inflation—powerful corporations that are ratcheting up prices to pad their profit margins.
Right now, the Fed and most of the economic establishment are wrongly obsessing about a “wage-price” spiral—wage gains pushing up prices—when they should be worried about a profit-price spiral—corporate profits driving up prices.
Rather than combatting a key driver of rising prices, the onus for controlling inflation is falling entirely on the Fed’s blunt instrument of job-sapping and recession-driving higher interest rates. This will only make things worse for people already struggling to get by.
But it doesn’t have to be this way.
Congress and the Biden administration have the power to take aim at corporate greed and protect everyday people from rising prices.
Know the truth—and urge our leaders in Washington to put the burden of inflation where it belongs: on price-gouging corporations.
Robert B. Reich is the chancellor’s professor of public policy at the University of California, Berkeley and former secretary of labor under the Clinton administration. Time Magazine named him one of the 10 most effective Cabinet secretaries of the 20th century. He is also a founding editor of The American Prospect magazine and chairman of Common Cause. His film, Inequality for All, was released in 2013. Follow him on Twitter: @RBReich.
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The Fed’s inflation mistake continues
Posted on December 2, 2022 by Robert Reich
The Federal Reserve has been hellbent on raising interest rates to slow the economy. It’s a huge mistake.
You know who bears most of the pain of these rate hikes?
Most of the pain is borne by people who are already struggling to keep up with rising prices: lower-wage workers and the poor.
While the Fed has signaled that its interest rate increases might not be as drastic moving forward, the important thing to remember is that these hikes already fail to address a major driver of inflation—powerful corporations that are ratcheting up prices to pad their profit margins.
Right now, the Fed and most of the economic establishment are wrongly obsessing about a “wage-price” spiral—wage gains pushing up prices—when they should be worried about a profit-price spiral—corporate profits driving up prices.
Rather than combatting a key driver of rising prices, the onus for controlling inflation is falling entirely on the Fed’s blunt instrument of job-sapping and recession-driving higher interest rates. This will only make things worse for people already struggling to get by.
But it doesn’t have to be this way.
Congress and the Biden administration have the power to take aim at corporate greed and protect everyday people from rising prices.
Know the truth—and urge our leaders in Washington to put the burden of inflation where it belongs: on price-gouging corporations.
This post originally appeared at RobertReich.org.
Robert B. Reich is the chancellor’s professor of public policy at the University of California, Berkeley and former secretary of labor under the Clinton administration. Time Magazine named him one of the 10 most effective Cabinet secretaries of the 20th century. He is also a founding editor of The American Prospect magazine and chairman of Common Cause. His film, Inequality for All, was released in 2013. Follow him on Twitter: @RBReich.