Manchin Turns Out To Be the Only Adult in the Room

Markets rose after Jay Powell finally emerged from his politically-induced coma and announced the Federal Reserve would raise interest rates by 25 basis points, with several more hikes to follow. He also told investors he would likely begin shrinking the Fed’s $9 trillion balance sheet as early as May.

Traders, it seems, welcomed certainty over the muddle that has been Fed policy for many months. Yet, most would agree that the central bank is entering a perilous phase; no one can remember a time when the Fed succeeded in pulling off a “soft landing.”

The yield curve is flattening, sentiment souring and forecasts of growth — including from the Fed — heading south. Many expect a recession in 2023. How did we get here? How did inflation deflate a healthy recovery?

President Biden has blamed Covid-induced worker shortages, supply chain issues, greedy companies, and Vladimir Putin for spiraling prices that are eating into Americans’ paychecks and trashing his approval ratings. Voters blame Mr. Biden, and investors point the finger at Chairman Powell.

Let us not forget, though, what undermined our country’s healthy bounce-back from the sharp but short-lived downturn in 2020. To do so would be to let economic miscreants off the hook and invite a repeat down the road.

The problems started when Mr. Biden and his party, emboldened by their 2020 victories, went on a partisan and unnecessary spending spree. In 2021, even as growth was accelerating, they passed their $1.9 trillion American Rescue Plan, stuffed full of handouts to Big Labor and other Democrat-aligned special interests.

Not a single Republican voted for the bill, which came just three months after Congress passed a $900 billion stimulus package. That brought total Covid relief spending to $5.4 trillion, more than was spent fighting World War II.

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Published on The New York Sun