"Even after all of the Fed's efforts to revive the economy, it still isn't clear it has done enough to promote a strong recovery. Economic forecasts call for the unemployment rate to linger above 8% through 2011," the Wall Street Journal says in a news article this morning. The unstated assumption is that the employment rate and the state of the economy are within the full control of the Federal Reserve. Left unexplored is the possibility that the Fed has done all it can, but that consumers are warily staying on the sidelines because they expect the rest of the federal government -- i.e., the president and Congress, to raise their taxes to pay for a health care overhaul, the "stimulus," and the auto industry bailout, and because their property rights are less secure than they were before the government started seizing companies and "saving" others left and right. In other words, if there are 60% marginal tax rates and no rule of law, the Fed can try all it wants to promote a strong recovery and it is not going to be very successful.
Unstated Assumptions and the Fed
by Editor | Related Topics: Auto Industry, Capital Markets Regulation, Health Care, Stimulus, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list