Greg Valliere, Chief Political Strategist
April 9, 2015
FOMC SURPRISE: Most of yesterday’s FOMC statement reiterated what we already knew — the first quarter weakness was probably temporary, there’s still some slack left in the labor markets, “liftoff” probably won’t come in June, etc. But there was one surprise, according to our colleague Don Kohn, the former Fed Vice Chairman.
THE STATEMENT EMPHASIZED THE DOLLAR AND ENERGY PRICES in terms of the inflation outlook and liftoff, Don said in an email yesterday, “and this was the major surprise.” The statement said that a leveling out of the dollar move and energy prices would be helpful in building confidence that inflation will rise, and the FOMC also indicated that the dollar’s strength and declines in energy prices were a reason to wait until later in the year to raise rates.
THESE TWO COMMENTS FROM THE FOMC seemed to refer to dollar/energy price movements that had already occurred, rather than projected ahead, although that wasn’t clear, Don said. In any event, “there seems to be less looking through the dollar/energy price effects than I had anticipated,” he said.
PRICKLY RAND PAUL: When reminded of his past quotes that conflict with his current positions, Rand Paul simply bashes the questioner’s temerity. His interviews this week were either great theater or cringe-inducing, depending on your perspective, but they represented a genuine red flag for Paul’s campaign — you don’t disrespect the media and get away with it (see: the Clintons). Paul is off to a rocky start compared to Ted Cruz, who raised an astonishing $31 million in the past week.
NEW RALLYING CRY ON THE LEFT — EXPAND SOCIAL SECURITY: Silly us, thinking that the next battle over entitlements would involve the beginnings of COLA reform and other measures to help avoid a train wreck in the next decade. No — the next battle may be to expand Social Security benefits. Activists on the left, led by Sens. Bernie Sanders and Elizabeth Warren, are sponsoring legislation that would increase the monthly benefit and make the COLA more generous.
THIS IDEA POLLS WELL, especially since it raises Social Security taxes on the wealthy. There’s a new rallying cry on the left — entitlements should be restructured to fight poverty and income inequality — and this makes it even less likely that cost-cutting is coming any time soon. The clock is ticking; entitlements will eat us alive in the next decade, and expanding them would be reckless, even though the idea polls well.