With progressive groups and lawmakers such as Massachusetts Senator Elizabeth Warren pushing for Biden to replace Powell, some Republican senators appear to be leaning toward supporting his re-election, arguing that any replacement Biden proposes would have a far more radical agenda on issues such as bank regulation. Conservatives who support Powell's re-confirmation risk "owning" the Fed's easy-money policies, as well as the inflationary spikes that have followed them.

Printing Money…

Inflation, according to Nobel Laureate economist Milton Friedman, is "always and everywhere a monetary phenomena." Because inflation occurs when too much money chases too few goods, any investigation of the present inflation rise must begin with the involvement of the Federal Reserve. Even now, about 20 months after COVID initially produced severe economic lockdowns and shocks in the United States, the Federal Reserve has maintained its foot on the monetary accelerator, creating money via "quantitative easing" to boost economic growth.

The Fed has been buying Treasury bonds and mortgage-backed securities at a rate of $120 billion per month since March 2020. The Fed kept driving its figurative automobile at 100 miles per hour, as a PBS "Frontline" series this summer shown, even after the acute shock to the economy from last spring's lockdowns had passed. However, by doing so, the Fed has inflated asset values in housing, equities, and other financial instruments, resulting in hazardous bubbles that might someday "pop"—with disastrous effects for the economy.

The Fed finally declared this month that it will take its foot off the monetary accelerator, if only slightly. It will gradually reduce its purchases by $15 billion each month, printing "just" $105 billion in November, $90 billion in December, and so on. Near that rate, the Fed would still pump $420 billion into the economy between now and the conclusion of its purchases in May—all while inflation remains at 30-year highs.

It's no surprise, then, that Sen. Joe Manchin, D-West Virginia, and Majority Leader Chuck Schumer, D-New York, agreed to move forward with a budget resolution paving the way for Democrats' multibillion-dollar spending bill only if the "Federal Reserve ends quantitative easing" in a document signed in July. Unfortunately, Manchin did not keep to his requirements, since if he had, the Fed would not have had to pump an extra $780 billion into the economy from August 1 through the conclusion of the Fed's money-printing program in May of next year.

… And Monetizing Federal Debt

Some may have forgotten, but the $1.9 trillion package passed by Democrats in March still has $709.8 billion left to spend in the current fiscal year (which ends September 30) and beyond. Furthermore, the multibillion-dollar spending measure that Democrats are attempting to drive through Congress this year would almost certainly raise the deficit—and hence inflation—in the first few years, though we have yet to get a Congressional Budget Office score to determine the exact amount.

If the Federal Reserve had already stopped its quantitative easing programs, and begun raising interest rates, Democrats likely wouldn’t have spent this fall trying to ram through trillions of dollars in new entitlement spending. Without the Fed buying up much of the available Treasury notes, bond markets may have taken a very dim view of the left’s plans to create a European socialist state, and the bill could have collapsed before it got off the ground.

‘Fire Jay Powell!’

With Powell and the Federal Reserve effectively tinkering as inflation soars, more observers are calling for the country's central bank to take more aggressive action. Mohamed El-Arian, an influential economic researcher, stated on Monday that the Federal Reserve is "losing credibility" by not halting its money-printing operations sooner. Even Jason Furman, who chaired the White House’s Council of Economic Advisers in Barack Obama’s second term, called for faster action from the Fed to fight inflation in a Wall Street Journal op-ed:

The oversize and poorly designed $2.7 trillion fiscal stimulus passed in December and March is at least partly to blame for [higher inflation in the U.S. than in Europe]….The [Federal Reserve] should express a more realistic understanding of inflation and firm up monetary policy by tapering its asset purchases more quickly. The Fed should set the default expectation that the federal-funds [interest] rate will be on an upward path starting in the first half of 2022.

With experts like these blaming the Federal Reserve for a lackadaisical approach to inflation, Senate Republicans should avoid confusing their messaging on price rises by voting for the Fed's architect. Instead, they should make a strong case for Powell's replacement as chair—hopefully this spring, but no later than the 2024 presidential election.

In the middle of their legislative orgy of socialistic giveaways and identity politics, Democrats might want to contemplate that their political priorities do not command the support of a majority of American voters. Moreover, the warnings on this front do not come from the right—they come from leftists themselves.

When an editorial columnist from the bastion of liberalism, The New York Times, writes that “Democrats are worried—very worried—about the future of the Hispanic vote,” you know something’s up. As it turns out, the radicalized “woke” among upper-class whites have done a good job alienating both African Americans and Hispanics from the Democratic coalition.

Minorities Abandoning the Left

Times columnist Tom Edsall cited polling data from Public Opinion Strategies showing that Democratic support among self-described conservative Hispanics shifted by a whopping 50 points over eight years. Democrats won these voters by a 10-point margin in 2012, but lost them by 40 percentage points last year.

Conservative African Americans likewise showed migration away from Democrats. While the African-American vote moved away from Democrats on a smaller scale, the party’s dependence on winning the vast majority of Hispanic and African American votes to achieve electoral success makes any migration away from Democrats by minority populations a cause for alarm.

A separate interview with lefty data analyst David Shor reinforced the views in Edsall’s column. Shor argues that political polarization by educational status has in many ways supplanted polarization by race.

While the Democrat vote increased by seven percentage points among white college graduates in 2020, the party’s support among African Americans dropped by one to two percentage points, among Hispanics dropped by eight to nine points (and as much as 14-15 points in areas like South Florida), and among Asian Americans by roughly five points. Shor notes that “I don’t think a lot of people expected Donald Trump’s GOP to have a much more diverse support base than Mitt Romney’s did in 2012. But that’s what happened” (emphasis original).

Wokes Alienating Minority Groups

In observing that “highly educated people tend to have more ideologically coherent and extreme views than working-class ones,” Shor finds that the migration of “woke” college-educated whites into the Democratic coalition has radicalized the party—thereby repelling non-whites among the working-class:

As Democrats have traded non-college-educated voters for college-educated ones, white liberals’ share of voice and clout in the Democratic Party has gone up. And since white voters are sorting on ideology more than nonwhite voters, we’ve ended up in a situation where white liberals are more left wing than Black and Hispanic Democrats on pretty much every issue: taxes, health care, policing, and even on racial issues or various measures of ‘racial resentment.’ So as white liberals increasingly define the party’s image and messaging, that’s going to turn off nonwhite conservative Democrats and push them against us.

Shor considers these developments a flashing red light for the left: “Most voters are not liberals. If we polarize the electorate on ideology—or if nationally prominent Democrats raise the salience of issues that polarize the electorate on ideology—we’re going to lose a lot of votes.”

Several of the political analysts Edsall quotes in his column agree with Shor’s contention that a radicalized Democratic Party could alienate many more voters than it attracts:

• Democratic consultant Marc Farinella: “As far left activists compete with Democratic Party leaders to define party values and messaging, the centrist voters needed to achieve a durable majority will remain wary about Democratic desires for dominance.”
• Harvard professor Ryan Enos: “The question for parties is whether members of their coalition are a liability because they repel other voters from the coalition. For Democrats, this may increasingly be the case with college-educated whites. They are increasingly concentrated into large cities, which mitigates their electoral impact, and they dominate certain institutions, such as universities and the media. The views emanating from these cities and institutions are out of step with a large portion of the electorate.”
• Republican pollster Whit Ayres: “When white liberal Democrats start talking about defunding the police, the Green New Deal, and promoting policies that can be described as socialistic, they repel a lot of Hispanic voters. In other words, most Hispanics, like most African Americans, are not ideological liberals.”
• Stanford University political scientist Bruce Cain: “Democrats set themselves up for losses if they do not pay attention to the realities of public opinion.”

So much for the oft-repeated leftist mantra about how “demography is destiny,” and the supposedly enduring nature of the Democratic coalition.

Shor’s ‘Solution’ for the Left: Rig the System

Looking ahead to next year’s midterm elections to Congress, in which the president’s party traditionally loses seats, Shor worries that ideological polarization will lead to an electoral bloodbath for the left. In his view, those historic trends, coupled with the structurally conservative nature of Congress—one where Republican voters are distributed more efficiently than Democratic voters, who are largely concentrated in urban areas—mean Democrats have very grim chances in the next several elections.

What does Shor think Democrats should do about this looming catastrophe? Rather than moderating their policies, Shor thinks the left should use the current Congress to tilt the playing field permanently in its direction—by requiring red states to redraw their congressional districts in a more pro-Democrat manner, and admitting new states that will increase Democratic votes in the Senate:

Since the maps in the House of Representatives are so biased against us, if we don’t pass a redistricting reform, our chance of keeping the House is very low. And then the Senate is even more biased against us than the House. So, it’s also very important that we add as many states as we can.

Currently, even if we have an exceptionally good midterm, the most likely outcome is that we lose one or two Senate seats. And then, going into 2024, we have something like seven or eight Democrats who are in states that are more Republican than the country overall.

Basically, we have this small window right now to pass redistricting reform and create states. And if we don’t use this window, we will almost certainly lose control of the federal government and not be in a position to pass laws again potentially for a decade.

Those kinds of potential electoral consequences for the Democratic coalition should prompt the newly radicalized left to rethink their policies, rather than trying to rig the system to offset the effects of their unpopular ideas. Sadly, however, they probably won’t.