Sen. Joe Manchin (D-W.V.) has urged the Federal Reserve to immediately reconsider its actions on monetary policy and begin to “taper the Fed’s ongoing stimulus” in order to avoid “overheating” the economy.
“With the recession over and our strong economic recovery well underway, I am increasingly alarmed that the Fed continues to inject record amounts of stimulus into our economy by continuing an emergency level of quantitative easing,” wrote Manchin.
The Fed lowered short-term interest rates to near-zero levels last year and began purchasing $120 billion per month in government bonds to stabilize markets and support the economy after it was disrupted by the CCP (Chinese Communist Party) virus pandemic.
Manchin said the federal government actions on asset purchases since June 2020, despite increasing vaccination rates and additional money Congress in the ARP are of great concern to him since inflation is evident.
“The record amount of stimulus in the economy has led to the most inflation momentum in 30 years, and our economy has not even fully reopened yet,” said Manchin. “I am deeply concerned that the continuing stimulus put forth by the Fed, and proposal for additional fiscal stimulus, will lead to our economy overheating and to unavoidable inflation taxes that hard-working Americans cannot afford.”
In a July 28 statement, the Federal Reserve said it will continue to monitor the economic situation and that while there is inflation, it sees it as “transitory.”
“With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen,” said the Fed in a July 28 release. “The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered. Inflation has risen, largely reflecting transitory factors.”
“In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate.”
Manchin said the March 2020 $2 trillion CARES Act and the $1.9 trillion American Rescue Plan in 2021 provided ample stimulus for the economy, urging the federal reserve to not overdo the stimulus in a strong recovery period.
“I urge you and the other members of the Federal Open Market Committee to immediately reassess our nation’s stance of monetary policy and begin to taper your emergency stimulus-response,” Manchin wrote.
Republicans blame the $1.9 trillion American Rescue Plan as one of the key causes of the recent inflation. They are also critical of further spending and increasing the national debt, which has now surpassed $28 trillion.
This week the Senate is considering a $1 trillion bipartisan infrastructure package and next week will begin considering a $3.5 trillion reconciliation bill, which Republicans have panned as wasteful Democrat wish list and even Manchin has cautioned against.
“We’ve got inflation, we’ve got a $28.6 billion debt, we have $4 billion a day growing in debt—all this should be considered before we just jump in,” Manchin told CBS’ “Face the Nation” on Aug. 1, when asked about Democrats’ attempt to tie the $1 trillion bill to the $3.5 trillion package.
Progressives like Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) say they will not vote yes on the $1 trillion bipartisan infrastructure bill—which appears to have the 60 bipartisan votes to pass the Senate, even with most Republicans opposing it—if the Senate does not pass the $3.5 trillion funding bill.
Reuters contributed to this report.