How the Fed Can Avoid a Recession
November 18, 2022
The benefits of a target inflation range.
The Roosevelt Rundown features our top stories of the week.
Why the Fed Needs a Target Inflation Range
Preserving employment while reducing inflation is possible.
But the Fed’s current 2 percent inflation target and persistent interest rate hikes create the real risk of recession.
As Roosevelt fellow Justin Bloesch explains in a new issue brief, a target inflation range between 2 percent and 3.5 percent would help the Fed better balance its dual mandate of maximum employment and stable prices.
“In this new framework, the Fed should also target employment shortfalls and see through the effect of sectoral supply shocks on inflation,” Bloesch writes—an acknowledgment that the Fed is ill-equipped to address the sort of supply-side disruptions we’ve seen during COVID and the war in Ukraine.
“[B]oth Canada and Australia have inflation range targets and have experienced strong employment growth while maintaining stable inflation,” Bloesch explains. “This best-case scenario is possible and well within our reach.”
Why Neoliberalism Is Finally on the Way Out
Brad DeLong knows a thing or two about the US economy. As one of the world’s leading macroeconomists, a former Treasury Department deputy assistant secretary, and author of the new book Slouching Towards Utopia: An Economic History of the Twentieth Century, DeLong is an expert on both the history and theory of neoliberalism.
And he’s as surprised as anyone that it came to power so completely, and that it’s lasted this long.
“In my heart of hearts, I still cannot believe that the New Deal order collapsed as rapidly as it did in the 1970s,” DeLong says.
On a new episode of How to Save a Country, DeLong and hosts Felicia Wong and Michael Tomasky dig into what came next, and Tomasky comes out of host mode to talk about his new book The Middle Out: The Rise of Progressive Economics and a Return to Shared Prosperity.
For more How to Save a Country, catch up on Wong and Tomasky’s conversation with Rep. Hakeem Jeffries, who just announced his bid to succeed Speaker Nancy Pelosi as House Democratic leader.
What We’re Reading
We’re Done Celebrating. Now Here Are Six Things to Do to Save Democracy. – The New Republic
Is This the End Game for Crypto? – New York Times
Solutions Centering Black Women in Housing [feat. Roosevelt fellow Mehrsa Baradaran] – Nonprofit Quarterly