Interest Rates and Excuses

The change in interest rates doesn’t come at the greatest time for the American economy. The administration and Congress are now accountable.

Rarely has a meeting of the U.S. Federal Reserve Board been given as much attention as the current one. Unable to return to its former strength since [before] the financial crisis, the rate hike hits the economy hard.

Economic growth languishes around 2 percent. The unemployment rate has been cut in half – to 5 percent – since its peak at the end of 2009. Yet many millions of Americans are no longer included in the statistic because discouraged job seekers have ceased their search for employment. The zero interest rate policy used by the Fed since 2008 has kept the U.S. economy on firm footing in the years following the threat of a cascade, caused by the bankruptcy of Lehman Brothers.

But such a gain in momentum has never been seen before. The ultra-loose monetary policy and all of the weapons in its unconventional arsenal have also nurtured false expectations that economic growth depends solely on such policy. The other agents of economic policy, Congress and the administration, no longer have any excuses after the change in interest rates. They are now responsible for stimulating the economy. Perhaps they could start with tax reform.