Blog: Fed's policies working at cross purposes with Obamacare

Blog: Fed's policies working at cross purposes with Obamacare

 July 18, 2013

Fed's policies working at cross purposes with Obamacare

Bruce Johnson

As the Federal Reserve implements poor tools to hold to an outdated mandate, the unintended consequences of misguided legislation known as Obamacare has put the Federal government and its efforts to improve the national employment picture in opposition with itself.

Is anyone surprised that the leviathan known as the Federal Government would have forces clashing within as it applies misguided efforts?

The Federal Reserve is utilizing monetary policy to "maximize" employment per its mandate struck in the 1970s.

The Affordable Care Act known as Obamacare is discouraging hiring per the unintended consequences of complicated and misguided legislation.

In the corporate world, a business in such a predicament would either have emergency board meetings to solve the issue or fail.  As citizens, we are forced to watch the  governmental idiocy.

Per its mission statement authored in 1977 The Federal Reserve has three mandates, one of which is maximizing employment via monetary policy. There are many things different today than back in the 1970s when this mandate was created.  Perhaps we should recognize that fact and reassess our situation.

In 1977 we had a near balanced budget (53 billion dollar deficit), a balanced trade picture, and Nixon had just years before visited China and helped usher them into the world economic community.  It was a different world and we had a different economy. We manufactured much of what we consumed, rather than importing. We were still a creditor nation.  In 1977 our national debt was well under 1 Trillion dollars. The prime rate was around 7%.

Today, China and other pacific rim nations are dumping massive quantities of cheaply manufactured items into our economy. This dumping currently has a strong impact on keeping" tangible item inflation" down.  We are borrowing massive amounts of money from China and we have outrageous trade imbalances.  Why would a mandate from the 70s be applicable in an economy such as today with a world economic connectivity and imbalances and conditions unforeseen at that time?  In short, with the magnitude of importing cheap goods affecting inflationary pressures, and with the gutting of our domestic manufacturing capacity, how can inflation measuring and employment generation efforts not require different measures and new efforts?  Should the Federal Reserve be blindly following instructions from 35 years ago?

To complicate matters, as the Fed follows its mission, the implementation of recently passed poor legislation undoes much of its efforts and affects.  Not only have we lost much of our manufacturing capacity and thus employing ability, businesses are paralyzed by the complexities of the recent health legislation.  In efforts to survive the implementation of Obamacare, full time employees are being shed and replaced by part time employees in efforts to shelter themselves from the new law's ill effects.  As someone put it, "the Taco Bell down the street just went from thirty 40 hour a week employees to forty 30 hour a week employees.

Should Bernanke maintain low interest rates to reverse this predicament and other ill affects of bad law and agency overreach? No, but this appears to be exactly what is being attempted.

Its time for an emergency board meeting.  Our nation begs for leadership.