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Ahead of next week's Federal Open Market Committee meeting, a growing chorus of experts is raising questions about the Federal Reserve's sledgehammer approach to reining in inflation. Here's what they are saying:
Adam Tooze | European Institute at Columbia University:
Ahead of next week's Federal Open Market Committee meeting, a growing chorus of experts is raising questions about the Federal Reserve's sledgehammer approach to reining in inflation. Here's what they are saying:
Adam Tooze | European Institute at Columbia University:
"Raising interest rates is not going to bring more gas or microchips to market, but rather the contrary. Reducing investment will limit future capacity and thus future supply...If the generation of young people whose educations were blighted by Covid lockdowns finish their training only to find labor markets closed by a global downturn, it will be an inexcusable failure of policy." [10/4/22]
Ayhan Kose | World Bank:
"As central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023 and a string of financial crises in emerging markets and developing economies that would do them lasting harm." [9/15/22]
Barry Sternlicht | Starwood Capital Group:
"If the Fed keeps this up they are going to have a serious recession and people will lose their jobs" [9/15/22]
Brian Sack | D.E. Shaw, former Federal Reserve Bank of New York official:
"Moving in these 75-basis-point steps was effective when the Fed had a long way to go. It becomes more problematic when they need to calibrate policy more carefully, and I believe we're approaching that point." [10/8/22]
Cathie Wood | Ark Invest:
"Without question, food and energy prices are important, but we do not believe that the Fed should be fighting and exacerbating the global pain associated with a supply shock to agriculture and energy commodities caused by Russia's invasion of Ukraine."
"The Fed seems focused on two variables that, in our view, are lagging indicators--downstream inflation and employment--both of which have been sending conflicting signals and should be calling into question the Fed's unanimous call for higher interest rates." [10/10/22]
David Kelly | J.P. Morgan Asset Management:
"In the long history of Federal Reserve mistakes, one general error stands out. They tend to wait too long and then do too much... They appear to be well on their way to repeating this error today." [10/12/22]
"The Fed is in grave danger of tipping this economy into a recession by being more hawkish than they need to be right now." [9/12/22]
Greg Mankiw | Harvard University, former George W. Bush Administration official:
"...it's easy for a novice to overreact, and then if you turn too much in the other direction, it can be a source of instability rather than stability." [10/11/22]
Jeremy Siegel | Wharton School of Business:
"(Powell) is going to crush the wages, which have fallen behind inflation...you can't blame wages for inflation when they are two, three, five points behind inflation...I think the Fed is just way too tight." [9/24/22]
Joseph Stiglitz | Nobel Prize-winning economist:
"Will raising interest rates lead to more oil, lower prices of oil, more food, lower prices of food? Answer is clearly not. In fact, the real risk is it will make it worse... Why? Because what we need to do is to make investments to relieve some of these supply-side bottlenecks that are causing such havoc on our economy. It's going to make it more difficult." and "...raising interest rates in non-competitive markets may lead to even more inflation..." [9/2/22]
Katie Nixon | Northern Trust Wealth Management:
"So I'm not as nervous about a deep recession, but I do think that this latest dot plot and the summary of economic projections points to a Fed going a lot further than, perhaps, they need to go, given the inflation outlook, and that they are doing so at a time when the economy is quite vulnerable to a slowdown. It's not just the US economy, it's the global economy and this might be a bridge too far." [9/12/22]
Kurt Rankin | PNC:
"Unfortunately, wage growth in the U.S. economy has already begun to fizzle while inflation has remained stubbornly high. The Fed's 'demand destruction aims will only serve to weaken workers' bargaining positions in the labor market as consumer demand is undercut and businesses see less need to hire in response to slowing demand for their goods and services." [10/14/22]
Liz Shuler | AFL-CIO:
"There are some bad ideas floating around out there (to bring down inflation) like the idea that working people, who have kept the country running are to blame for inflation."
"Nothing could be further from the truth." [9/21/22]
Michael Darda | MKM Partners:
"I think households here are also caught in the Fed's crosshairs because the tightening is likely to keep going until it kills the labor market...They [the Fed] will kill inflation, but they are going to end up killing the labor market." [10/14/22]
Pierre-Olivier Gourinchas | International Monetary Fund:
"Monetary policy could miscalculate the right stance to reduce inflation. Policy paths in the largest economies could continue to diverge, leading to further US dollar appreciation and cross-border tensions. More energy and food price shocks might cause inflation to persist for longer. Global tightening in financing conditions could trigger widespread emerging market debt distress." [10/11/22]
Rebeca Grynspan | United Nations Conference on Trade and Development:
"The current course of action is hurting vulnerable people everywhere, especially in developing countries. We must change course."
"If you want to use only one instrument to bring inflation down...the only possibility is to bring the world to a slowdown that will end up in a recession." [10/3/22]
Email press@groundworkcollaborative.org to speak to Dr. Rakeen Mabud about the Fed's interest rate hikes and what they spell for our economy.
The Groundwork Collaborative is dedicated to advancing a coherent and persuasive progressive economic worldview and narrative capable of delivering meaningful opportunity and prosperity for everyone. Our work is driven by a core guiding principle: We are the economy. Groundwork Collaborative envisions an economic system that produces strong, broadly shared prosperity and power for all people, not just a wealthy few.
"Military industrial production can be redirected to civilian technologies that contribute to societal well-being and provide green jobs," says the Costs of War project.
A pair of reports published Thursday show that many workers employed in the U.S. military-industrial complex support shifting manufacturing resources from military to civilian use—a conversion seen as vital to the fight against the climate emergency.
Moving "from a war economy to a green economy" can help avert the worst consequences of the climate crisis, noted the Costs of War project at Brown University’s Watson Institute, publisher of the new research.
"Ever-higher military spending is contributing to climate catastrophe, and U.S. lawmakers need a better understanding of alternative economic choices," Stephanie Savell, co-director of Costs of War, said in a statement. "Military industrial production can be redirected to civilian technologies that contribute to societal well-being and provide green jobs. This conversion can both decarbonize the economy and create prosperity in districts across the nation."
In one of the papers released Thursday, Miriam Pemberton, an associate fellow at the Institute for Policy Studies, described "how the United States developed a war economy," as reflected in its massive $858 billion military budget, which accounts for roughly half of all federal discretionary spending.
As Pemberton explained:
When the U.S. military budget decreased after the Cold War, military contractors initiated a strategy to protect their profits by more widely connecting jobs to military spending. They did this by spreading their subcontracting chains across the United States and creating an entrenched war economy. Perhaps the most infamous example: Lockheed Martin's F-35 fighter jet, which is built in 45 states.
The strategy proved successful. Today, many members of Congress have political incentives to continue to raise the military budget, in order to protect jobs in their districts. Much of the U.S. industrial base is invested in and focused on weapons production, and industry lobbyists won't let Congress forget it.
Not only is the Pentagon a major contributor to planet-heating pollution—emitting more greenhouse gases than 140 countries—and other forms of environmental destruction, but a 2019 Costs of War study showed that "dollar for dollar, military spending creates far fewer jobs than spending on other sectors like education, healthcare, and mass transit," Pemberton continued.
Moreover, "military spending creates jobs that bring wealth to some people and businesses, but do not alleviate poverty or result in widely-shared prosperity," Pemberton wrote. "In fact, of the 20 states with economies most dependent on military manufacturing, 14 experience poverty at similar or higher rates than the national average."
"A different way is possible," she stressed, pointing to a pair of military conversion case studies.
"The only way to really lower emissions of the military is you've got to make the military smaller."
As military budgets were shrinking in 1993, Lockheed was eager to expand its reach into non-military production.
"One of its teams working on fighter jets at a manufacturing facility in Binghamton, New York successfully shifted its specialized skills to produce a system for transit buses that cut fuel consumption, carbon emissions, maintenance costs, and noise, called 'HybriDrive,'" Pemberton explained.
By 1999, Lockheed "sold the facility producing HybriDrive buses and largely abandoned its efforts to convert away from dependence on military spending," she wrote. "But under the new management of BAE Systems, the hybrid buses and their new zero-emission models are now reducing emissions" in cities around the world.
According to Pemberton, "This conversion project succeeded where others have failed largely because its engineers took seriously the differences between military and civilian manufacturing and business practices, and adapted their production accordingly."
In another paper released Thursday, Karen Bell, a senior lecturer in sustainable development at the University of Glasgow, sought to foreground "the views of defense sector workers themselves," noting that they "have been largely absent, despite their importance for understanding the feasibility of conversion."
Bell surveyed 58 people currently and formerly employed in military-related jobs in the U.S. and the United Kingdom and found that "while some workers said that the defense sector is 'socially useful,' many were frustrated with their field and would welcome working in the green economy."
"This was a small group so we cannot generalize to defense workers overall," writes Bell. "However, even among this small cohort, some were interested in converting their work to civil production and would be interested in taking up 'green jobs.'"
One respondent told Bell: "Just greenwashing isn't going to do it. Just putting solar panels up isn't going to do it. So we're trying to stress that the only way to really lower emissions of the military is you've got to make the military smaller."
"By the way, do we really need to update all our ICBMs [Inter-Continental Ballistic Missiles]?" the survey participant asked. "Don't we have enough to blow up the world three times over, or five times over? Why don't we take those resources and use them someplace else where they really should be?"
"The video must be that bad," said law professor Sherrilyn Ifill. "But fired does not prevent rehiring elsewhere, and charged does not mean convicted. But more important than all, none of this brings back Tyre Nichols."
Five Memphis, Tennessee police officers who were fired for what their chief called a "heinous, reckless, and inhumane" attack on a Black motorist who died three days after a traffic stop were booked and charged Thursday with crimes including second-degree murder.
Former Memphis Police Department (MPD) officers Tadarrius Bean, Demetrius Haley, Justin Smith, Emmitt Martin III, and Desmond Mills Jr—who are all Black—were charged with crimes including second-degree murder, aggravated assault-acting in concert, aggravated kidnapping, official misconduct, and official oppression, according to court records.
Speaking at a Thursday news conference announcing the charges, Tennessee Bureau of Investigation Director David B. Rausch described the five officers' actions as "absolutely appalling."
"We are here to pursue truth and justice, realizing that we should not be here," said Rausch. "Simply put, this should not have happened. I'm sickened by what I saw."
On Wednesday night, Memphis Police Chief C.J. Davis lamented the "horrific circumstances" of Nichols' death. Calling the victim's arrest a "failing of basic humanity," Davis vowed her department would "find truth in the tragic loss."
\u201cBREAKING: The 5 former Memphis Police Department officers have been indicted by a grand jury on charges ranging from second-degree murder, aggravated assault, aggravated kidnapping, official misconduct and official oppression for the death of Tyre Nichols.\u201d— Ben Crump (@Ben Crump) 1674759063
Nichols died on January 10 from cardiac arrest and kidney failure three days after Memphis officers pulled his vehicle over at around 8:30 pm on January 7. MPD claimed there were two "confrontations" between officers and Nichols, who allegedly ran away before being violently arrested. Complaining of shortness of breath, Nichols was rushed to St. Francis Hospital in critical condition.
All five officers were fired on January 20 after they "were found to be directly responsible for the physical abuse of Mr. Nichols," Davis explained. Two firefighters were also terminated in connection with the attack.
Earlier this month, U.S. Attorney Kevin Ritz—working with the FBI's Memphis Field Office and the U.S. Justice Department—launched a civil rights investigation into the case.
According to the Memphis Commercial Appeal, some of the officers involved belonged to an MPD unit called SCORPION, which stands for Street Crimes Operation to Restore Peace in Our Neighborhoods.
In 2016, a federal civil rights complaint was filed against Haley, alleging that he and other officers strip-searched an inmate at a penal farm and beat him until he blacked out, WHBQreported.
\u201cFired & charged w/murder. The video must be that bad. But fired does not prevent rehiring elsewhere, & charged does not mean convicted. But more important than all, none of this brings back Tyre Nichols. We need the abuse & murder by ofcrs to stop. And that requires a new way.\u201d— Sherrilyn Ifill (@Sherrilyn Ifill) 1674766025
Antonio Romanucci, an attorney representing Nichols' family, said Monday after viewing police bodycam footage of the attack on the 29-year-old father: "He was a human piñata for those police officers. It was unadulterated, unabashed, nonstop beating of this young boy for three minutes."
Civil rights attorney Benjamin Crump, who is also representing Nichols' relatives, compared the footage to the 1991 beating of Rodney King by Los Angeles Police Department officers.
"What we saw, regrettably, reminded us of the Rodney King video," Crump said Monday. "But, unlike Rodney King, Tyre didn't survive."'
The Shelby County District Attorney's Office said earlier this week that it will likely release footage of the incident at 6:00 pm local time Friday.
\u201cThe family of Tyre Nichols is demanding that Memphis police release their bodycam footage of the stop that landed him in the hospital in critical condition. \nTyre died from the injuries that he received at the hands of police during a traffic stop.\u201d— \ud83e\udd40_Imposter_\ud83d\udd78\ufe0f (@\ud83e\udd40_Imposter_\ud83d\udd78\ufe0f) 1673936022
"Yet again, we're seeing evidence of what happens to Black and Brown people from simple traffic stops," Crump contended. "You should not be killed because of a simple traffic stop."
"And we have to say to America: How you would treat our white brothers and sisters when you have a traffic stop with them, well, treat us Black and Brown citizens the same way," he added.
On Monday, Nichols' mother, RowVaughn Wells, called her son a "gentle soul."
"Tyre was a beautiful person. He loved to skateboard. He loved to take pictures. He liked to go see the sunset. And most of all, he loved his mother and he loved his son," she said.
Speaking of the fired officers, Wells added: "Those five men—their families are heartbroken as well. They hurt a lot of people when they did this. I don't understand why they had to do this to my son."
Tyre Nichols' mother on violent confrontationwww.youtube.com
Some civil rights leaders called on Congress to take action to prevent such incidents.
"It is only right that the Memphis Police Department takes the necessary additional steps to hold these officers accountable for their role in ripping apart a family and traumatizing a community. However, this is far from what justice looks like. Justice looks like the 535 members of Congress taking the time to turn their 'thoughts and prayers' into action and change," said NAACP president and CEO Derrick Johnson in response to Thursday's charges.
Johnson added:
Congress: Do something. By failing to write a piece of legislation, you're writing another obituary. By failing to pass the legislation, you're passing on your sworn duty to protect the people. We know just how much all of you will be thinking and praying upon the release of the video, you don't need to mention it. Instead, tell us what you're going to do about it. Tell us what you're going to do to honor Tyre Nichols. Tell us what you're going to do to show his family, his loving son, and this entire nation, that his life was not lost in vain. We can name all the victims of police violence, but we can't name a single law you have passed to address it.
The George Floyd Justice in Policing Act—named after the unarmed Black man murdered by Minneapolis police in May 2020—was introduced by then-Rep. Karen Bass (D-Calif.) in February 2021. The proposed legislation, which, among other reforms, would have banned police chokeholds and ended so-called qualified immunity for officers, passed the following month by a mostly party-line vote of 220-212. However, the bill failed to pass the Senate.
"The Biden administration has apparently decided to assume that corporate landlords are good-faith actors with their tenants' best interests at heart, despite all of the evidence to the contrary, and just plain common sense."
Economic justice advocates on Thursday said that to determine the strength of the Biden administration's new nonbinding push for renter protections from the federal and state governments and private sector, one needs to look only at the elated response from corporate landlords.
The Revolving Door Project (RDP) pointed to comments from the National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC), lobbying groups that represents landlords, that followed the White House's unveiling on Wednesday of its "Resident-Centered Housing Challenge" and "Blueprint for a Renters Bill of Rights."
"What we can say with certainty is NAA's advocacy helped avert an executive order advanced by renters advocates and members of Congress, which would have imposed immediate policy changes," said the NAA in a statement on Thursday.
\u201cNEW: Corporate landlords are celebrating Biden's weak new renter protection plan, openly boasting that their lobbying efforts stopped the White House from issuing a more powerful executive order to immediately crack down on rent-gouging. \nhttps://t.co/3lLbUwXhXB\u201d— Revolving Door Project (@Revolving Door Project) 1674758300
"The NMHC—which does the bidding of the nation's leading corporate landlords—celebrated the omission of national rent control from the White House plan while also objecting to other 'onerous regulations' contained in the release, which it claimed would 'discourage much-needed investments in housing supply,'" said Andrea Beaty, research director for the RDP.
"The Biden administration has apparently decided to assume that corporate landlords are good-faith actors with their tenants' best interests at heart, despite all of the evidence to the contrary, and just plain common sense," added Beaty. "The best the Biden administration offered is industry-approved, nonbinding measures that kick the can down the road."
The lobbying groups' response came as housing justice advocates noted that they have spent roughly a year calling on President Joe Biden to do everything in its power to address housing insecurity and the crisis facing households that are rent-burdened.
As Moody's Analytics reported on Thursday, the average U.S. tenant is now rent-burdened, which is defined as paying 30% or more of a household's income on rent.
"Tenant stories and expertise informed these actions, and tenants will continue to be central to policymaking that concerns their lives."
The firm compared the national median household income—$71,721—with 2022's average rent of $1,794. In 2021 the average renter paid 28.5% of their income on rent, and in 2020 they paid 25.7%.
The latest statistics represent "a symbolic threshold, a milestone," Thomas LaSalvia, director of economic research at Moody's, toldThe New York Times.
"The rent-to-income ratio continued to climb up because income growth was not able to catch up with the rent growth," Lu Chen, a senior economist at the firm, told the newspaper.
Following months of meetings between tenant groups and administration officials, as well as advocacy by Sen. Elizabeth Warren (D-Mass.) on behalf of renters, the White House on Wednesday proposed a number of actions the government will take to gather data about the housing crisis and push federal agencies—but not require them—to consider how they can curb rent costs.
The White House said it had secured commitments from the Federal Trade Commission and the Consumer Financial Protection Bureau to "collect information to identify practices that unfairly prevent applicants and tenants from accessing or staying in housing."
The Federal Housing Finance Agency (FHFA) said it would "launch a new public process to examine proposed actions promoting renter protections and limits on egregious rent increases for future investments," while a workshop by the U.S. Department of Justice will address "anti-competitive information sharing, including in rental markets."
The Biden administration also said the U.S. Department of Housing and Urban Development will propose new rules requiring public housing and rental assistance authorities to provide 30 days' notice before terminating a lease due to rent nonpayment.
The White House also released a nonbinding Blueprint for a Renters Bill of Rights, affirming tenants have the right to clear and fair leases, to organize, and to have access to safe, quality, and affordable housing. Its Resident-Centered Housing Challenge, starting in the spring, will encourage state and local governments to enhance policies that promote fairness in the rental market, urging them to "make their own independent commitments that improve the quality of life for renters."
People's Action, whose Homes Guarantee campaign helped lead efforts to secure renter protections and rent price regulations, said its organizers helped "shape this policy for the better," and said the commitment from the FHFA offers an opportunity for the agency "to create a policy that helps check the power of landlords."
But as the NAA boasted, People's Action told The Washington Post that the policies will not change "tenants' lives materially today."
"Tenant stories and expertise informed these actions, and tenants will continue to be central to policymaking that concerns their lives," said Tara Raghuveer, director of the Homes Guarantee campaign. "The rent is still too damn high. While the White House announcement affirms a role for the federal government in correcting the imbalance of power between landlords and tenants, the president can do much more to provide relief to tenants. We are counting on this administration to continue working with our campaign to make it happen."
Ahead of Biden's proposal, People's Action led 281 national and local tenant organizations in calling on the White House to direct federal agencies to: