Interest Rates Aren’t Our Only Tool For Fighting Recessions

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Neil Irwin offers a different perspective on interest rate cuts from the Fed:

The Fed’s interest rate tools are poorly suited to protect the economy from shutdowns in production resulting from disease fears. Economists can’t invent a vaccine or slow disease transmission rates. On the other hand, you go to war with the recession-fighting tools you have, not those you might wish to have.

But assuming the central bank indeed cuts interest rates to try to buffer the economy from damage, it would find itself with interest rates of around 1 percent or lower, in an economy that is doing quite well, for the moment at least. That leaves little room for further stimulus through that conventional tool. Even a mild downturn would mean the Fed would be looking to less conventional tools, including the quantitative easing policies used extensively from 2009 through 2014, and sending more explicit signals about its intention to keep rates low far into the future.

Irwin is right about this, but it’s telling that he stops where he does. Because there is, in fact, one more conventional tool for fighting a recession: fiscal policy. When interest rates can’t go any lower, Congress can intervene to stimulate the economy with massive deficit spending. This is, admittedly, not a Fed tool, but who cares? In a sane country, it would still be a tool that we could count on if things get bad. The fact that Irwin doesn’t even bother mentioning it is a sign that no one trusts either Congress or the president to act rationally in the event of an economic turndown.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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