Tag: Congress

One Small Step for Better Monetary-Policy Models

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By Karen Shaw Petrou

When I spoke at the Federal Reserve Bank of New York on March 1, I pressed hard for less reliance on data that washes away growing U.S. economic-inequality gaps.  Happily, many at the talk readily concurred.  For those who disagree, take note: an amendment added on March 6 to a House Financial Services Committee budget statement for the first time demands that the Fed do better when it makes judgments about U.S. prosperity. Continue reading “One Small Step for Better Monetary-Policy Models” →

The Mother of All Negative Feedback Loops: Economic Inequality, Political Polarization, and the 2018 Congress

~ Karen Petrou ~ 2 Comments

By Karen Shaw Petrou

Does economic inequality lead to political polarization that then creates gridlock that increases economic inequality and turns negative feedback into M.C. Escher’s tessellated stairway to a political doom loop?

After the first full year of Donald Trump and a GOP-controlled Congress, it’s easy to conclude that we’re in the part of the cycle where inequality leads to polarization and then to gridlock broken only by anti-distributive policies and more acute polarization before gridlock sets in again.  Getting a really bad feeling, I turned to a review of academic literature on economic inequality and political polarization.  It generally confuses causality and correlation, but nonetheless shows that conventional wisdom is right:  all of these forces make this a particularly parlous political session with potentially dangerous consequences for long-term comity and even stability.  Put another way, 2018 will be way ugly. Continue reading “The Mother of All Negative Feedback Loops: Economic Inequality, Political Polarization, and the 2018 Congress” →