Something is missing from the front-and-center of the presidential campaign. The American economy has long been stagnant. We are growing at maybe half the historic trend line and far beneath that of the robust growth of Reagan and Clinton.
Anemic 2% growth may not seem like a big deal. It is. A 1% - 2% annual shortfall may seem trivial. It’s not. Compounded over 15 years that means that the American economy, and each of our paychecks and net worth, is around a third lower than it should be. Most everyone outside the “1%” feels this hole in our pocketbooks.
This stagnation has implications for the federal deficit, for the solvency of Social Security and Medicare, and for our ability to afford a robust defense. Most of all it means that the vast majority of voters are struggling economically. The growth gap occurred under both Republican president George W. Bush, and Democratic president Barack Obama. It is unseemly forcandidates to criticize Party Elders, which may in part explain their diffidence. But it’s so.
A feckless Fed torpedoed the economy under both Presidents Bush and Obama. As TheWashington Post’s Ylan Q. Mui noted in Why nobody believes the Federal Reserve’s forecaststhe Fed has gotten 50 out of 50 of its last economic forecasts badly wrong. If the National Weather Service had a track record that bad heads already would have rolled. The Fed enjoys a strange impunity.
Reagan and Clinton’s robust job growth occurred under the Volcker-Greenspan “Great Moderation.” That policy was abandoned around the year 2000 thrusting America into a miserable “boom-and-bust” cycle.
The sign on President Truman’s desk, “The Buck Stops Here,” in a very literal sense applies. Still, the buck — Federal Reserve Notes — starts at the Fed. The candidates’ tax plans also are relevant to economic growth. But monetary policy is paramount.
The candidates have been strangely quiet about it, possibly not wishing to impugn their Party Elders. Still, voters can dig down and find where they stand. We should.
Donald Trump has presented a disturbing criticism of Fed Chair Janet Yellen for not raising interest rates, observing in the next breath that doing so would plunge America into a “recession-slash-depression.”
Gov. Christie has called for an audit of the Fed as have Sens. Rubio, Cruz, and Paul. Gov Christie has attributed partial blame to the Fed for the widening gulf between the rich and poor and blasted it for keeping interest rates at zero.
Gov. Bush has been almost mute on this topic.
Sen. Ted Cruz and, less directly, Sen. Rand Paul have called for a restoration of the gold standard (a policy also commended, in passing, by Trump and Carson). This controversial policy correlates closely with some of the best economic growth in American history, including America’s post-war economic boom era.
As James Carville wrote, “It’s the economy, stupid!” Voters, in deciding for whom to vote, would do well to look at the candidates’ positions on the Federal Reserve. The buck starts there.