Hacker News Reader

Comment by abvdasker | Hacker News Reader

Powell has said explicitly that one of the Fed's short term goals is to bring down wages.

"What's this? The American working class is struggling because wages haven't kept pace with cost of living in 50 years? Surely suppressing wages even more will fix that!"

Personally, I think this slow moving inflation disaster is the result of the US government's inability to raise taxes. They have to reduce the money supply somehow to fight inflation and they're doing it with one hand (fiscal policy) tied behind their back. I suspect the reason is because tax increases are politically toxic while monetary policy changes made by the Fed are seen as apolitical. To be even more cynical about it, one could argue that the wealthy people and corporations who control politicians have an obvious interest in preventing tax increases even when it would benefit the economy as a whole in the long term.

Tax policy also acts much more slowly for individuals. Beyond that, I don’t think this is US-specific issue. Are there any countries at the moment trying to address near-term inflation via fiscal policy?

> Personally, I think this slow moving inflation disaster is the result of the US government's inability to raise taxes

I'd argue the opposite. We print absolutely insane amounts of money, which is an indirect tax via inflation (and a regressive one at that, since the rich own more inflation-resistant asset classes than the poor, who don't really own any assets). Higher taxes and less money printing would make that hidden tax less hidden, which is good, but the core problem is spending/printing too much, not taxing insufficiently.

Bring down wage growth, not the wages.

Basically manufacturing is at an all time low, and rebooting post-pandemic will be harder with higher wages given how strong the U.S. dollar is. Of course, wage stagnation is finally being corrected so there may be little to control that.

He said that a goal is to slow wage increases, not decrease wages.

His exact words were "get wages down".

it is vital that the poors remain poors. The entire economy depends on it! Wish this was sarcasm. Worst part is he is absolutely talking about the lower level wages in the $10 - $20 and hour range.

Here's a quote from Powell himself:

> And so what we need to do is we need to get demand down, give supply a chance to recover and get those to align. So how might we do that? Right now, in the labor market, there are two job openings for every unemployed person. It’s historically high-level. So in principle, and I’m not saying this will be easy to do, in principle, you could moderate demand, reduce demand to the point where job openings move down substantially, and the labor market gets much closer to being in balance. And that would affect … wages would still be moving up at healthy levels. They wouldn’t have to go down, but ultimately they would be at levels that would be consistent with 2% inflation.

Reply on news.ycombinator.com