Last week featured some of the most spectacular political developments in years. For starters, the GOP race has begun to look more and more like a track-and-field event than a typical primary race. Rick Santorum, who has really come into his own in the last month, won Iowa; Newt Gingrich, who has already “died” twice in this race, won South Carolina; and Mitt Romney, who seemed the inevitable nominee, is currently scrambling for Florida. I’m left wondering not who will win, but when will it all be over?
In addition to the election buzz, last week saw President Barack Obama deliver his State of the Union address. I barely recognized the union he described. He called for the socialization of education from grade school through graduate school, and hinted at turning community colleges into union-sponsored trade schools. Any treatment of the economy, however, was almost absent from his speech.
Instead, he echoed many speeches from the mid-20th century, emphasizing protectionism and manufacturing rather than open trade and new industries.
While the State of the Union address largely ignored economic matters, the Federal Reserve policy makers compensated for this in their Wednesday decision to keep interest rates next to zero through 2014. This decision more than answered why President Obama was silent on the issue just two days prior – our government does not believe that the United States’ economy will improve on its own over the next two years. The federal government confirmed its commitment to this cloudy economic forecast when it decided, in the face of its own insurmountable debt, to keep interest rates low enough to stimulate the economy artificially.
Hiring rates improved in the last quarter of 2011, says Fed Chairman Ben Bernanke, but the Fed is less concerned with domestic effects on the economy and more with the effect of the crisis in Europe.
Should the Eurozone actually fail, as it has threatened to do for some months now, our interdependent, globalized economy would be in real trouble. Twice last year, the Fed tried to pass long-term, low-interest measures, only to be foiled by dissenting members who cast their votes in favor of optimism that the economy was improving. The fact that all ten members of the Federal Reserve board have now decided to keep interest rates low reveals their fear that rough times are ahead – at least until 2014.