What's On The 2024 Agenda? According to Jerome Powell, It May Not Gonna Be Rate-Cuts!

A report on April 16th from the Federal Reserve Chair Jerome Powell seems to backtrack on the possibility of interest rate cuts for Americans. After raising interest rates to combat inflation throughout 2023, Powell previously agreed to keep them steady throughout January of 2024 and foresaw (economy permitting) two rate cuts in the future. However, on Tuesday, when asked about when these rate cuts will be happening in 2024, Powell seemed hesitant to make any promises:

"The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence," Powell told a forum in Washington. Powell seems to maintain that the interest rate increases need time to act, and that until they do, it's unwise to make any confident declarations about when the interest rate cut-backs will come. 

As many of us learned in class recently, in mid 2022 to early 2023, the Federal Reserve Chair Jerome Powell proposed hiking interest rates, with the Republican party backing him and consequently pressuring the U.S. Federal Reserve to do so. The cause of this proposition was the growing trend of inflation (caused by excessive federal government spending and the 2021 COVID-relief stimulus checks), and many Americans were concerned that this would cause unemployment rates to skyrocket. And even though these interest rate hikes catalyzed the "soft landing" that led to high praises of the Federal Reserve and Jerome Powell for their decision-making and recession prevention, the threat of these increases continuing into 2024 prompted a swift Democratic backlash. 

Early this year, Democratic senators Elizabeth Warren, John Hickenlooper, Jacky Rosen, and Sheldon Whitehouse penned a letter to Fed Chair Powell imploring him to cease the interest rate hikes, as they had resulted in higher costs for homebuyers and renters. According to the Democrats, the rate increases had sparked a cataclysmic event in the housing market and tanked housing affordability, which majority of lower to middle class Americans did not want on the 2024 Bingo Card. Though they acknowledged that Powell vowed to keep the rates steady for the foreseeable future, they still maintained that rate cuts are a necessity and need to come as soon as possible, as the effects of the interest rate hikes are being felt tremendously by the American public.

Like many of the issues plaguing our country, however, this issue isn't entirely a question of the betterment of the American people, but rather the potential political issue it may present for the highly anticipated 2024 election for Democrats. Democrats fear that the event of a continued bout of rate increases would harm a Biden reelection. As ABC News states, the most recent Democratic presidential candidate to lose the presidential nomination when it came time for his reelection was Jimmy Carter, and he lost the presidency because of rate hikes at the Federal Reserve. For Democrats, now is not the ideal time for economic unrest, and the interest rate cuts could not possibly come sooner. The interest rate cuts would further decrease unemployment rates, and these economic improvements could be instrumental to Biden retaining his presidency.

Naturally, this means that it is in the best interest of the Republican party to make sure that these rate cuts do not happen before election day. Hence, former President Donald Trump, who is currently undergoing a felony fraud court case, took Powell to case in a Fox Business Network interview, calling him “political” for entertaining the idea of rate cuts, which he believes would advocate for a Biden presidency in the 2024 to 2028 term. For context, Powell was first nominated to be Fed chair by Donald Trump in 2017, but has fallen out of grace with him for being too independent of politics; Trump vows that if he is elected president once again, he will replace Powell when his term as chair ends in 2026. Powell maintains that “this independence both enables and requires us to make our monetary policy decisions without consideration of short-term political matters,” so it appears as though he (for the moment) won't be cowed into submission by Trump or the supportive sector of the Republican party.

For now it remains to be seen what will become of the promised rate cuts and what they will mean for the 2024 election, but they are certain to make for a flamboyant declaration of economic policy, regardless of who wins the presidency.

Sources:

https://abcnews.go.com/Business/interest-rate-cuts-2024-election/story?id=105752108

https://abcnews.go.com/Business/interest-rate-cuts-2024-election/story?id=105752108

https://www.reuters.com/markets/us/feds-powell-jefferson-square-restrictive-policy-with-strong-data-2024-04-16/

https://thehill.com/business/4435570-democratic-senators-call-on-fed-to-cut-interest-rates-over-high-housing-costs/

https://thehill.com/business/4513519-fed-chief-caught-in-partisan-battle-over-rate-cuts-as-election-looms/

https://apnews.com/article/federal-reserve-powell-inflation-economy-rates-jobs-f9c65fb1b8116168f825657bc5f5c117

https://www.wsj.com/economy/central-banking/powell-dials-back-expectations-on-rate-cuts-00e3e5d0

https://www.investopedia.com/us-economy-news-today-housing-starts-and-permits-nosedived-in-march-8634124

Law And Order: Special Presidents Unit (aka The Beginning of Donald Trump's Criminal Hush Money Trial)

Today marks the beginning of former President Donald Trump's criminal hush money trial, the first of his four impending trials (and 34 felony counts), and a historic move by the courts. Never before has a former US President been indicted on account of criminal activity, and this particular piece of criminal activity is especially unbecoming. The charges involved in this trial, from Manhattan District Attorney Alvin Bragg, can be traced back to the $130,000 dollars former Trump lawyer Michael Cohen paid adult film actress Stormy Daniels to keep quiet about an alleged affair between her and the former president, around the end of the 2016 election. While this in itself is certainly an icky situation, the hush money aspect isn't necessarily illegal. The illegal portion happens to be that Trump repaid Cohen in installments that were marked as "legal fees" in his company's records, which is considered as fraud. Especially considering that these payments were made around the time of the 2016 election, it stands to reason that the DOJ would consider paying of Daniels to have been an attempt "to influence the 2016 presidential election" by concealing the potentially nasty secret of an affair. 

The former President didn't take this all lying down, of course, as he vehemently denied all of the allegations presented and maintained that he should have some level of immunity as a former president. This has been a common thread with many of his criminal proceedings, as he has consistently argued that his former position of power in the US exempts him from being indicted on account of his various criminal activities. This was especially true in terms of the felony counts of him obtaining classified government documents from his time in office and stowing them away in an unprotected location (i.e. a bathroom in Mar-a-Lago). Trump's lawyers' main argument was that the Presidential Records Act (PRA) allowed the president to have possession of these documents, but this has been highly contested by the public and the courts.

The trial kicked off today with the choosing of potential jurors and individual jury questioning. This was a rather contentious situation, as many jurors were excused right away for their admitted inability to be impartial in the proceedings. Judge Juan Merchan maintained that jurors should try their best to be impartial, regardless of their political affiliation, and urged jurors to consider whether they would act the same way if they were of the same political party of the president. Meanwhile, the Trump Media stock price has plummeted more than 18% after the company sold millions of additional shares, clearly gearing up for the plethora of fines they're about to incur from Trump's criminal endeavors. 

All in all, it is unclear as to whether this trial will really amount to much, but given the general scandalousness of this situation, it is safe to say that this may sway Trump's base a bit, as it would be controversial to be in support of a convicted felon (if it comes to that). However, the gravity of this situation in the long term is ambiguous for now, and whether this trial will effect his chances of snagging a second tenure of president remains to be seen. 

Sources:

https://www.usatoday.com/story/news/politics/elections/2024/04/15/donald-trump-trial-new-york-live-updates/73308381007/

https://www.axios.com/2024/03/25/trump-new-york-hush-money-criminal-trial

https://www.nbcnews.com/politics/donald-trump/live-blog/trump-hush-money-trial-stormy-daniels-michael-cohen-live-updates-rcna145934

https://www.washingtonpost.com/politics/2024/03/14/trump-documents-presidential-records-act/

Minimum Wage Increases for California's Fast Food Workers Take Effect

        Last September, Assembly Bill 1228 was approved by Governor Gavin Newsom. This law mandated restaurants with 60 or more establishments across the country to increase the wages of the workers at their California locations to $20 an hour starting April 1, 2024, among a few other provisions.

That day has arrived. 

        This new floor is 25% greater than the general minimum wage in the state ($16) and 176% greater than the federal minimum wage ($7.25). In anticipation of Assembly Bill 1228 becoming active, some franchisees (independent owners operating one or more locations of a chain) have already laid off (or announced their plan to) some of their staff in order to cut costs and retain profits, such as the 1,200+ delivery drivers across a couple of Pizza Hut franchises that were laid off at the tail end of 2023. This corroborates the sources we looked at last week in our lesson about minimum wage increases, and highlights how such policy is almost always a trade-off between equity and employment. However, there may also be an outcome to this law that does not just result in layoffs en masse. Similar to what followed Seattle’s minimum wage hike, workers may simply clock fewer hours (saving employers some money) while still making more in a day than before the increase due to how substantial the raise is for many. There will inevitably be some jobs lost in either outcome, but the latter is the lesser of two evils in my opinion. 

    Something mentioned less in last week’s sources was the effect of minimum wage increases on the price of goods at businesses affected by the raises. In order to be able to pay workers more, restaurant companies are planning to raise prices (as if California living wasn’t expensive enough) in order to pay their employees what is required by the bill. Some restaurants have left it up to the discretion of franchisees, while some companies are planning to increase prices universally. Nothing has been rolled out yet to my knowledge, but this illustrates another trade off of minimum wage increases being equity and affordability. 

        Although many of these effects sound rather bleak, the increase will affect over 500,000 workers in a sector relatively accessible to those below the poverty line looking for a job. I am also optimistic (perhaps naively) about the Fast Food Council created by this bill, intended to develop standards regarding wages and working conditions for California fast food restaurants, as I might start looking for a job this summer and have heard many horror stories from those who have worked at these establishments.

For any prospective commenters:

Will you be affected by this increase? If so, positively or negatively?
Do you agree with Assembly Bill 1228’s changes? 

Sources:

https://www.businessinsider.com/california-pizza-hut-lays-off-delivery-drivers-amid-new-wage-law-2023-12

https://www.latimes.com/business/story/2024-03-27/fast-food-minimum-wage

https://www.latimes.com/california/story/2024-03-28/fast-food-workers-minimum-wage-is-going-up-which-chains-will-up-their-prices

https://www.gov.ca.gov/2023/09/28/california-increases-minimum-wage-protections-for-fast-food-workers/

https://www.npr.org/2024/03/30/1241451631/california-fast-food-20-minimum-wage