The Federal Reserve’s decision to scale back rate hikes at their last two meetings will be “looked at as an historic mistake because that refueled inflation,” Breitbart Economics Editor John Carney said in an interview Wednesday on Larry Kudlow’s eponymously named Fox Business show.
“I think that a lot of people thought that inflation was going away,” Carney said. “All the information we’ve had about January and now also February says inflation is back. The Fed stepped down in December and then stepped down again in the January-February meeting. And that is going to be looked at as an historic mistake because that refueled inflation, and we’re coming right back up again.”
As Carney noted in Wednesday’s Breitbart Business Digest, January’s inflationary surge “appears to be more persistent than expected,” and the latest data confirms this:
When inflation jumped much higher in January, many analysts were quick to write it off as a seasonal fluke or a one-time adjustment to higher wages and a big boost in Social Security benefits. Recent data, however, indicates that inflationary pressures have continued through February.
This resurgence, Carney noted, “follows the Federal Reserve’s decision to step down the pace of rate hikes—a policy choice that increasingly looks like it was a mistake.”
However, Carney told Kudlow that Fed officials will be happy about one bit of economic data: the fact that Americans are increasingly pessimistic about the job market.
“It makes Jay Powell very happy to see this much misery in America because he has been out there trying to say that we need jobs to go down,” Carney quipped.
Fed officials are “going to be very happy to see that the American people expect there to be fewer jobs,” he said, but added that Americans are still “too optimistic” about the job market.
“Only 20 percent of people or so say there’ll be fewer jobs six months from now. Jay Powell has said he wants there to be a lot fewer jobs six months from now. So yeah, it should be 100 percent of Americans because the Fed is not going to rest until there are fewer jobs.”
The Democrats’ attempts to inject social policy into industrial policy is only exacerbating inflation, Carney explained when Kudlow criticized what he characterized as “woke provisions” in the CHIPS Act that mandated things like childcare for plant workers. Both Carney and Kudlow argued that such provisions are unrelated to the bill’s aim of onshoring semiconductor manufacturing in the United States to increase American competitiveness with China and secure a stable domestic source of these crucial components which are used in everything from automobiles to the military’s weapon systems.
The CHIPS Act’s childcare provision in particular could be inflationary, Carney argued.
“Where are you going to find the childcare workers?” he asked. “We have a 3.4 percent unemployment rate. There’s not a lot of people out there to do childcare. We actually have fewer childcare workers today than we did before the pandemic hit. So, are these people just going to be invented? No, it’s going to force up demand for childcare, which then means the price will go up. So, this will make childcare more expensive — not just for the people who are in the chips industry, but for everybody in America. It will drive up demand for this by imposing this.”
“When you accept government money, it is always going to come with strings attached,” he added. “Republicans forgot this. They thought, ‘Oh, hey, we can pass a CHIPS Act industrial policy, and it’ll just be industrial policy. It’s not just industrial policy. It’s social policy as well, and it is a disaster for Americans.”
“What does the semiconductor industry or onshoring the semiconductor industry have to do with daycare centers?” Kudlow asked.
“They want to get more businesses on the government feed,” Carney speculated. “They couldn’t get Congress to pass any of these rules. This isn’t stuff they could legislate, but they can force businesses to do it.”
“They couldn’t get Build Back Better where all this crap was in the first place. So, they’ve jammed it in here, and then it comes out as regulations,” Kudlow added.
The average cost of childcare is roughly 10 percent of the median income for a married couple and 35 percent for a single parent, according to a report last year by the childcare advocacy group Childcare Aware. However, in a city like Phoenix, Arizona, which has emerged as a hub for the semiconductor industry, the average cost of childcare is higher than the national average and can run as high as 19 percent of a manufacturing or construction worker’s salary, according to the New York Times.
The Times also notes that the childcare industry continues to see a shortage of about 58,000 workers since its pre-pandemic high point, according to a study of Labor Department data by the University of California-Berkeley’s Center for the Study of Childcare Employment.
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