Jindal Joins the Fed Debate

Over at his widely-read Iowa blog Caffeinated Thoughts, ThePulse2016.com’s own Shane Vander Hart asked Gov. Bobby Jindal during his Iowa visit about a lot of things, including why the economy is so bad and what he would do to make a difference. Jindal spoke about the negative effects that Obamacare and EPA regulations are having on economic growth, called for an energy policy that can create good “$80,000 blue collar jobs.” He called for solutions other than college for all to address stagnant wages, including vocational training and education reform.  He spoke about “real tax reform,” without corporate carve outs for big business but a lower, flatter rate for all.

Then Vander Hart asked a key question: “Where does the value of the dollar fit in?”

At the 15:32 mark or so, Jindal took on the Fed:

Here is my concern: We have $18 trillion of borrowing and we’ve got artificially low interest rates because of Fed policies. At some point, and it’s not predictable when and nobody can tell you exactly when it is going to happen, at some point this is going to catch up with us. You can’t keep printing and borrowing money like this forever.

And what I worry about is that you could see a very significantly weaker dollar, you could see very high rates of inflation, and the only choice the government is going to have in that scenario is to rapidly increase interest rates.

Now a lot of people are too young to remember the stagflation of the Seventies and how hard it was when Reagan came in to break the back of inflation and how hard it was—the high interest rates and what that did to the economy in the short term but the medicine he felt was necessary and proved to be necessary to grow the economy again.

We are living on borrowed time, whether you are an expert on economics or not it’s pretty simple: you can’t keep living beyond your means. We can’t just keep assuming that other countries are going to continue buy our debt. We can’t just assume it’s inevitable the dollar is going to be the global reserve currency. We can’t assume that this is sustainable.

That’s why we need leaders in D.C. that are willing to shrink, reduce the size of government, not slow down the growth rate but actually reduce the size of government, balance our budget, start paying off our debts.

We need a stronger dollar; we need a sustainable monetary policy.  We don’t have that today, and my concern is this administration has never even proposed to balance the budget at any point; he does ten-year projections there is never any point that it ever balances. They continue to kick the can down the road and the problem is only going to get worse not better…

There is no plan out of the administration to ever really begin addressing this. Their only plan is to raise taxes.  There are many Democrats who are content with this scenario, because their answer is going to be whenever this scenario plays out, that’s fine, we’ll just raise taxes dramatically, we’ll grow government. That’s what they really want to do anyway.

That’s why I think we need real leaders in government saying we need to shrink government.

He proposes some pretty dramatic reforms, but they are both unlikely to happen and aimed at balancing the budget and preventing tax increases but not shrinking the rapidly growing mission and power of the Fed to choose winners and losers in the economy:

We need structural reforms, I think we need a constitutional amendment to balance the budget, I think we need term limits, I think we need to stop these members from simply becoming lobbyists, I think we need to have a constitutional amendment that they can’t grow the budget faster than the economy is growing without a supermajority vote. They can’t increase our taxes without a supermajority vote. . . . I have another idea they aren’t going to like. . . . Let’s pay members of Congress per diem.  Let’s pay them for every day they stay outside of D.C.

This is the kind of economic argument from conservatives that makes me want to tear out what is left of the hair on my head: in the middle of an economic disaster for the average middle-class family, voters aren’t interested in your future doomsday scenarios.

Voters know the economic gain is currently rigged against Main Street while Wall Street flourishes. They need to understand how the Fed policy is hurting voters now.

The classic argument against manipulating money is that it leads to inflation, and Bobby Jindal makes the case that at some point in the future it will and that at some point in the future a conservative leader might therefore have to inflict pain on voters to save the economy.

This is an enormously weak argument from a very smart man, which indicates he hasn’t yet digested the debate.

Maggie Gallagher is the editor of ThePulse2016.com.