AFL-CIO economist warns Fed Is using ‘flat wrong’ analysis to inflict pain on workers
The top economist for the largest labor organization in the United States on Wednesday said the Federal Reserve’s decision to continue raising interest rates is a “political” one based on a flawed analysis of the causes of inflation.
“The Federal Reserve is doing the greatest harm I could ever imagine,” William Spriggs, chief economist of the AFL-CIO, told The Hill. “I consider what they’re doing right now politics, and they are making a political statement about the economy, and they are wrong. Their analysis is flat wrong.”
The Federal Reserve has claimed a labor shortage, increased wages, and struggles within global supply chains are to blame for inflation, which currently stands at 8.2%. In response, the central bank has increased interest rates several times this year, most recently by three-quarters of a percentage point last month.
Spriggs denounced the bank for ignoring external factors that are driving inflation, including the effects of the climate crisis on global agricultural production.
As The Hill reported, Spriggs “pointed to a major drought affecting rice-growing regions in China, a heat wave in Europe that destroyed much of the corn crop, and massive flooding in Pakistan that wiped out huge swaths of different crops, including 20% of the cotton harvest.”
Those crises have pushed global commodity prices up by more than 55% this year, with food commodities up nearly 24%, according to the U.N. Conference on Trade and Development. For U.S. consumers, grocery prices are up more than 13%.
“It’s dangerous to the moment to tell the American people that the source of inflation is endogenous to the system, that it is related to excess demand,” Spriggs told The Hill. “Nothing could be further from the truth. Diverting us from the actual conversation that we need to be having—we, meaning human beings—is so dire.”
In addition to the impact of extreme weather—as well as Russia’s invasion of Ukraine—on global crops and the price of food and fuel, multiple economists have pointed to corporate profiteering and price gouging as key factors that are driving inflation.
Progressives have called for policies to provide relief for working families, including legislation that would crack down on corporations that price-gouge, and the reinstatement of the expanded child tax credit.
The Federal Reserve is likely going to continue raising interest rates in the coming months, with a 4.6% rate anticipated next year—up from the current 3.08% effective rate.
“The Federal Reserve characterizing American inflation as unique, and caused by excess demand, prevents discussing policies to ameliorate higher prices for stressed American households navigating these novel supply shocks and policies to address them,” Spriggs said. “It is a political statement.”
Originally published at Commondreams.org.
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