By now, Jerome Powell, chairman of the Federal Reserve, is probably used to criticism from the likes of Sen. Elizabeth Warren (D-MA) and other populist-left lawmakers. They’ve lambasted Powell in recent months over his handling of inflation and the job market.
Now, Powell faces fresh scrutiny from a prominent voice on the other end of the political spectrum: Florida Gov. Ron DeSantis, who is widely expected soon to launch a bid for the 2024 Republican presidential nomination. DeSantis has made Powell a political punching bag as the governor crisscrosses the nation promoting his new book.
THE FED’S PREFERRED INFLATION MEASURE GIVES IT NO ROOM FOR A RATE CUT
“This Fed chairman has been a total and complete disaster,” DeSantis said at a book tour stop in the Atlanta suburbs, according to the Miami Herald. “And you are paying for it, and people all across this country are paying for it.”
DeSantis’s comments offer a preview of his potential political strategy and campaign messaging if he decides to take on former President Donald Trump for the Republican presidential nomination. Specifically, how the Florida governor might win the support of the GOP base, much of which still favors Trump, while distinguishing himself enough to win over essential independents and swing voters.
By aiming his ire at the Fed, DeSantis is taking a not-uncommon populist route that could capitalize on voter discontent with both Trump and President Joe Biden, whose approval numbers were hammered by inflation, experts say.
“In many ways, it is not surprising at all,” Sarah Binder, a political science professor at George Washington University, told the New York Times. The Florida governor is positioning himself to the right of Trump, Binder said, “and it sounds like many populist right-side critiques of the Fed, of monetary control, that we’ve heard throughout history.”
As prices on consumer goods and services hit record highs last year, the Fed embarked on an aggressive campaign to cool inflation, approving a series of historically large interest rate increases. By making debt more expensive, the Fed hoped to weaken consumers’ buying power and therefore limit demand as supply chains recover from major pandemic-caused disruptions.
Though some prices have started to retreat to their pre-pandemic levels, inflation has been a stubborn beast for the Fed to tame, remaining relatively high despite the U.S. central bank’s successive 75 basis point rate hikes.
“Monetary policy affects the economy and inflation with uncertain lags, and the full effects of our rapid tightening so far are yet to be felt,” Powell said in a speech at the Brookings Institution in November. “It is likely that restoring price stability will require holding policy at a restrictive level for some time. History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.”
It’s Powell’s insistence on staying the course with strict monetary policy that has concerned Warren and other liberal Democrats, who argue that Powell has focused too heavily on the price stability element of the Fed’s dual mandate at the expense of maximum employment, the other element. They fear that successive interest rate hikes are designed to slow the economy.
“The Fed has raised interest rates eight times over the last year in what has been the most extreme rate-hike cycle in 40 years,” Warren told Powell at a March hearing before the Senate Banking Committee, according to her office. “The Fed’s goal is to slow inflation, and your tool — raising interest rates — is designed to slow the economy and throw people out of work.”
“So far, you haven’t tipped the economy into a recession, but you haven’t brought inflation under control either,” she continued. “And maybe the reason for that is that other things are keeping prices high — things you can’t fix with high-interest rates, things like price-gouging and supply chain kinks and war in Ukraine. But you’re determined to continue to raise interest rates.”
Powell, who has acknowledged that bringing down inflation will likely cause the public some economic “pain,” told Warren that job losses are not the “intended consequence.” Warren, citing the Fed’s economic projections that said unemployment would hit 4.6% by the end of the year, asked Powell what he would say to the 2 million people she estimated would lose their jobs.
“I would explain to people more broadly that inflation is extremely high, and it’s hurting the working people of this country badly, all of them,” Powell replied. “Not just 2 million of them, but all of them are suffering under high inflation, and we are taking the only measures we have to bring inflation down.”
Since then, Warren has said that Powell failed in his role. “He has had two jobs. One is to deal with monetary policy. One is to deal with regulation. He has failed at both,” she told NBC News’s Meet the Press on March 19. “Look, I don’t think he should be chairman of the Federal Reserve. I have said it as publicly as I know how to say it. I’ve said it to everyone.”
Ohio Sen. Sherrod Brown, chairman of the Senate Committee on Banking, Housing, and Urban Affairs, made similar arguments to Powell in a letter late last year, listing supply chain problems, the effect of Russia’s invasion of Ukraine on fuel prices, and corporate price-gouging as core drivers of inflation. The letter noted, like Powell has, that changes in monetary policy can take a while to show results.
“While, for now, the labor market remains relatively stable, we are starting to see job openings decrease and unemployment claims rise,” he said. “We must stay focused on addressing the root causes of inflation without putting workers’ livelihoods at risk.”
“For working Americans who already feel the crush of inflation, job losses will make it much worse,” he added. “We can’t risk the livelihoods of millions of Americans who can’t afford it.”
DeSantis’s denouncement of Powell, who himself is a Republican and was first nominated by Trump, then renominated by Biden, are similar but distinct from Democrats’ criticisms in that they also center on the Fed chairman’s handling of inflation but list differing causes. DeSantis says the Fed spurred inflation when it “printed trillions and trillions of dollars.”
“That obviously is going to create inflationary pressures,” DeSantis recently said in Naples, Florida, according to the Miami Herald. “And so people were saying this, that this was always going to happen. They didn’t want to listen. And so you had inflation start to percolate.”
DeSantis also blamed Powell for waiting too long to tackle inflation, citing the Fed chairman’s past comments about inflation being “transitory.”
“So then what does the Fed do?” DeSantis said. “Jerome Powell, they start hiking rates very rapidly. And that’s causing dislocations in the banking sector. It’s causing individuals to suffer just because they took their eye off the ball and didn’t know what they were doing.”
“And, you know, I think the Fed has done a horrible job over these last few years,” DeSantis continued. “And they really are creating potential significant turmoil in the economy going forward.”
Republican strategist and former GOP operative Liam Donovan said DeSantis’s critiques of Powell are a workaround to direct attacks on Trump, who remains popular among Republican voters, despite a competing desire for a new party face.
“You can’t upfront say that Trump was bad or that Trump failed,” Donovan told the outlet. “You can say these people that Trump empowered failed, or led us astray.” DeSantis is “setting the table for a future line of argument with Powell and Fauci and other Trump-era figures, who he will argue failed the American people,” he said.
DeSantis has also taken aim at the Fed, and the Biden administration more broadly, over its rescue of Silicon Valley Bank, which collapsed in March and sent damaging ripple effects throughout the economy.
“If there was a bank in this part of Pennsylvania that serviced, like, agriculture or small businesses, do you think that they would have been bailed out under similar circumstances? No,” DeSantis said in Pennsylvania, according to the outlet. “So what they’re trying to do with their policies is make all of us deal with the harm, but the elites get insulated from their decisions.”
DeSantis’s critiques don’t stop there. He’s also condemned the Fed over the possibility that it could introduce a central currency, a type of digital dollar. On April 7, the Federal Reserve said on Twitter that it had “made no decision on issuing a central bank digital currency (CBDC) & would not do so without clear support from Congress and the executive branch, ideally in the form of a specific authorizing law.”
In a quote tweet, DeSantis said: “It is not merely ‘ideal’ that major changes in policy receive specific authorization from Congress; it is constitutionally required. Unaccountable institutions cannot impose a CBDC on Americans. They will tell us that CBDC won’t be abused but we are wise enough to know better.”
“This wolf comes as a wolf,” he added.
Whether DeSantis’s recent lines of attack centered on monetary policy will stick with voters, if and when he announces a bid for the White House, is unclear. But at any rate, his message has already resonated among some in his party.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
“Ron DeSantis has focused his book tour remarks — a test drive for his presidential campaign — mainly on his Florida record,” the Wall Street Journal editorial board wrote on April 13. “But lately he’s also hit on a larger theme: the failures of monetary policy and the Federal Reserve. The Governor is on to something, and the debate could be good for the economy and the country.”
The outlet said DeSantis’s Fed remarks are “unusual because most Republicans blame inflation solely on President Biden’s spending. But monetary policy has also played a major role, and it’s notable that a leading Republican politician is willing to say it.”
