The Federal Reserve turned down its invitation to a Tea Party. The Fed looked at the havoc Tea Party Republicans want to create with the U.S. budget and decided to put more sand bags in the economic dike.
Ben Bernanke and his fellow bankers decided on September 18 to keep buying $85 billion in mortgage bonds and treasury bonds, hoping they can keep the feeble economic recovery from collapsing into recession when the Tea Party Republicans refuse to raise the debt ceiling.
The good news is that Fed Chairman Ben Bernanke is trying to keep the economy on track as we head into a serious collision between the Democrats and the Republicans over the federal budget and the debt ceiling resolution – both of which have to be resolved in October. The bad news is the economic expansion is so weak, a few weeks of political confusion might plunge us back into recession.
Buried in the back part of stories about the Federal Reserve’s decision was the grim news that the Fed’s economists have lowered their predictions for economic growth. The new prediction is for tepid growth of 2.0 to 2.3 percent this fall – a rate that will not put many people back to work. The Fed and the mass media have finally noticed what I pointed out last spring in this blog – much of the fall in the unemployment rate is coming from people dropping out of the labor force.
Look at this, the number of people in the labor force, that is, working full or part time or looking for work, fell by 312,000 in August. As a result the labor force participation rate fell to just 63.2 percent – the lowest it has been since 1978, back when it was pretty common for only one adult in a household to be working. The impact is staggering – the unemployment rate has fallen 2.7 percentage points from a peak of 10 percent in 2009 to 7.3 percent in August. The majority of that decline, 1.8 percentage points is from the drop in the participation rate!
Enter the Tea Party/Republican Party. In utter disregard for the spreading poverty around them, the House of Representatives voted 217 to 210 to slash $40 billion from the Food Stamp program. This is the latest round in the right’s relentless push to re-distribute income through tax cuts for the rich and benefit cuts for the poor. As usual, this subversive program is obscured by a fog of words proclaiming a moral crusade against deficit spending and the undeserving poor. For example, Representative Marlin Stutzman of Indiana, who led the Republican push for the cuts, said “This bill eliminates loop-holes, ensures work requirements, and puts us on a fiscally responsible path.”
What nonsense. The 44 million Americans, one in every seven of us, who have their income supplemented by food stamps and the 48 million Americans without health insurance are not causing our economy to stumble along. The Republicans have been using this “blame-the-victims economics” for over a generation.
It only works if the rest of us are unable to see that the root causes of our problems lie in the selfish decisions being made by bankers, hedge fund managers, right-wing CEOs, and the political leaders they support with millions in political donations. Don’t take my word for it, ask Ben Bernanke. If the Federal Reserve Board is afraid of the political plans of the Republican Party, then we should be too.