Real cost of the Fed’s interest rate hikes
The Federal Reserve’s policy-setting meeting in late September brought the expected news on interest rates: no change for now, but a possible increase before 2024 as the Fed feels its way toward the vaunted “soft landing” that cools inflation without driving the economy into recession. But before making any further decisions on rates, the Fed should consider who will experience this hypothetical soft landing and who will suffer through a crash landing.
Over the summer, I raised this very question along with other civil rights advocates when we met with Fed Chairman Jerome Powell. Just two weeks later, they raised interest rates by another quarter percent.
In April, the unemployment rate for Black Americans — which consistently runs higher than for whites or the overall workforce — hit an all-time low of 4.7%. Right now, as general unemployment has inched back up to 3.4%, Black unemployment is nearly two percentage points higher at 5.3%. If rising interest rates push overall unemployment up past 4%, as the Fed has projected, Black unemployment will reach recession levels quickly.
Higher interest rates also push homeownership farther out of reach for millions of working-class Americans, particularly Americans from the
Black, Latinx and certain Asian and
Pacific Islander communities. Because homeownership remains the primary way American families build wealth, this disadvantage perpetuates our nation’s yawning racial wealth gap. The white homeownership rate sits at about 75%, and has not dropped below 70% in nearly three decades. Compare that to 50% or less for Latinx Americans and consistently well under 50% for Black Americans.
Nationally, home prices are actually slightly higher than they were a year ago. Combined with high mortgage rates, that leaves very few working families able to buy a home.
The Fed’s preferred inflation-fighting tool, ramping up interest rates, is designed to cool wage growth and drive up unemployment — as they say, that’s not a bug, it’s a feature. And it will, without doubt, disproportionately hurt communities of color.
weeks ago on Meet the Press. “We hope we never have to make this decision.”
It’s a decision practically guaranteed to be among the most politically fraught in his career as governor.
The governor promised months ago to appoint a Black woman to replace Feinstein, should the need arise.
He reiterated that during his Meet the Press appearance, by agreeing to “abide by what I said very publicly on a consistent basis” — that is, to appoint a Black woman.”
At the same time, he made it clear that he would not appoint a current candidate for Feinsteins’ seat, but rather, would pick a “caretaker” to serve out her term, so as not to influence the outcome of the March 2024 primary.
That’s already an extremely competitive race with three Democratic frontrunners: Rep. Adam Schiff, Rep. Katie Porter and Rep. Barbara Lee, with Schiff and Porter currently in the lead.
Lee, who is Black, is highly regarded and one of the obvious choices for an appointment, had Newsom not summarily disqualified her — a decision that drew an angry rebuke from Lee.
“The idea that a
Black woman should be appointed only as a caretaker to simply check a box is insulting to countless Black women across this country who have carried the Democratic Party to victory election after election.
“There are currently no Black women serving in the Senate. Since 1789, there have only been two Black woman Senators, who have served a total of 10 years. The perspective of Black women in the U.S. Senate is sorely needed — and needed for more than a few months. Governor Newsom knows this, which is why he made the pledge in the first place.”
Newsom is now in an extremely awkward position — one of his own making.
He may, however, be overestimating how that appointment will influence the March election.
That’s only five months away, and that hardly gives an appointee time to forge a record in the Senate.
While polling shows there are still many undecided voters, at this point Schiff and Lee have a strong lead, with Lee trailing.
Under the circumstances, the power of the incumbency may not as strong as it might normally be. This appointment is temporary and hardly a coronation.
Newsom should absolutely keep his promise by appointing a Black woman to replace Sen. Dianne Feinstein.
She should be both willing to serve and well-qualified for the job — regardless of whether she’s a current candidate. And now there are only 47 Democrats in the Senate, along with 49 Republicans and three independents.
Newsom has no time to waste.