Opinion: A feckless Fed, huge deficits and poisonous politics bring us to a crisis
Opinion: A feckless Fed, huge deficits and poisonous politics bring us to a crisis
MarketWatch
Published: March 16, 2020 at 7:48 a.m. ET
By Howard Gold
... Fiscal irresponsibility, toxic politics and a Fed that was too afraid to offend stock investors have combined with the coronavirus, a black swan if there ever was one, to create the current crisis whose resolution right now looks murky.
One crisis after another, plus the persistence of the “Greenspan put,” kept the Fed from raising the federal-funds rate anywhere close to the 5.25% it hit before the financial crisis. It took three years for the FOMC to raise fed funds from 0%-0.25% to a mere 2.25%-2.5%, but only a year to do a round trip back to zero... The massive 2017 tax cuts, which primarily helped wealthy taxpayers and big corporations, provided a small, temporary boost to economic growth, but they and the subsequent feeding frenzy of spending increases approved by the Republican Congress have left us with a $1-trillion federal deficit even before the economic effects of the coronavirus epidemic ripple through the economy.
Most economists agree recoveries are times to fill the federal coffers and crises or recessions are the time to spend the money. But there’s little room for the huge fiscal stimulus some economists say is needed to fight this crisis.
... Which brings us to politics. For decades, polarization has been increasing sharply in Washington, D.C. And let’s not mince words here; it’s been driven by a rapid move to the extreme right by the Republican Party, from the Tea Party to the election and mass worship of the faux populist Donald J. Trump... The GOP’s extreme rejectionist politics first appeared in the heat of the financial crisis when House Republicans voted down the Bush administration’s Troubled Asset Relief Program (TARP). They reversed themselves after the Dow Jones Industrial Average slumped. But the same hatred of the federal government persists.
https://www.marketwatch.com/story/a-feckless-fed-huge-deficits-and-poisonous-politics-bring-us-to-a-crisis-2020-03-16
