AP FACT CHECK: The Kavanaugh nomination and the world beyond
WASHINGTON (AP) – The world beyond a memorable Senate hearing marched on this past week. The Federal Reserve acted to make borrowing more expensive and people’s savings accounts a tad more flush. President Donald Trump relived the 2016 election, yet again, wrongly stating he won the women’s vote. He signed off on a retooled trade agreement with South Korea and misrepresented what it does.
All eyes were on Supreme Court nominee Brett Kavanaugh and his accuser.
In the strange mix of Senate posturing and a prosecutor’s dispassionate questioning, Kavanaugh and his Senate supporters jumped to a conclusion that was not supported by the testimony over whether he sexually assaulted Christine Blasey Ford when she was 15 and he was 17. They said, accurately, that Ford has not produced witnesses who corroborate her allegations. They also said, wrongly, that witness statements entered into the record exonerated him.
A review of the week’s rhetoric and the facts behind it on multiple fronts:
TRUMP: “Unfortunately, they just raised interest rates a little bit, because we are doing so well. … I am not happy about it. I’d rather pay down debt or do other things, create more jobs. So I’m worried about the fact that they seem to like raising interest rates. We can do other things with the money.” – news conference Wednesday.
TRUMP: “(Obama) was playing with zero-interest money. He was playing with funny money, that’s easy. I’m playing with fairly expensive money – so when he does that the people that benefit are people that actually, in their whole life they would save 10, 15, 20 percent of their salary – those people got killed. Because they put their money in the bank they’re going to live off the interest, and there was no interest.” – remarks Wednesday.
THE FACTS: This is an odd and contradictory assessment of the Fed and interest rates.
He decried the Fed’s rate increase, yet several minutes later criticized the near-zero rates from 2008 to 2015 as hurting people with savings accounts.
What does seem clear is that Trump misrepresented the Fed’s basic mission of keeping prices stable.
With the unemployment rate at a low 3.9 percent, Fed officials voted unanimously on Wednesday to increase a key short term rate for the third time this year. They did so to limit the risk that inflation could accelerate to levels that would destabilize the economy and cause a downturn. The president didn’t directly acknowledge this risk.
Trump said he’d rather the Fed spur job growth or pay down the debt, though these options were not fundamental choices before the U.S. central bank.
Fed officials don’t see a rate increase as imperiling job growth. Despite previous increases, “job gains have been strong, on average,” they said in a statement. Trump has repeated similar claims at his rallies about solid job growth.
Trump also suggested that the Fed could somehow reduce the national debt. It’s not clear how it would’ve done so Wednesday. Budget deficits come from the fiscal policy set by Congress and the president. A president who wants to reduce debt could cut spending or raise taxes. Trump has done neither and the Congressional Budget Office expects government debt loads to climb.
The Fed can buy Treasury notes, which it did after the 2008 financial crisis, to reduce borrowing costs for the government, companies and consumers, and to spur growth. The risk is that higher inflation could occur given the relative health of the economy. In fact, congressional Republicans said in a 2010 letter that Fed policies would sink the economy through surging inflation. That didn’t happen, in part because the unemployment rate was then 9.8 percent and the economy still showed signs of needing a boost.
Did the low rates hurt savers? Probably some. But that case is probably overstated.
In 2017 congressional testimony, Harvard University economist Karen Dynan, a former Treasury Department official, said savings accounts, checking accounts and similar holdings are just 5 percent of overall household assets. More people’s net worth depends on homeownership and the stock market, both of which benefited from the lower Fed rates.