We’ve never quite liked the “Deep State” as a descriptor, as it tends to suggest dark and, well, deep, hidden machinations by unknown actors. That’s not quite right. The Deep State consists of a long list of very public institutions, staffed by people listed in some publicly available directory, acting in broad daylight but subverting democracy nonetheless, writes George Gilder, editor of Gilder’s Technology Report.
In theory, anyone sufficiently interested can keep informed about what these institutions are doing. In practice their actions are almost impossible to track, appeal, or bring under democratic authority.
Essentially, every federal agency, whether “independent” or theoretically subordinate to the Executive Branch, carries three antibodies immunizing it from democracy: Invisible, Implacable, Irresponsible.
The Federal Reserve exemplifies all three. The meaningless melodrama of the federal funds rate is all too visible, but did the public have any hint of the bureaucratic failures that led to two massive bank failures in a month?
Did Congress know – much less approve – how those disasters would be settled, with possibly viable banks wiped out, sweetheart sales orchestrated, and credit markets undermined as senior bondholders were punished while shareholders of the acquiring banks were rewarded?
As for implacable, has anyone asked you whether you prefer the risk of a recession to the risk of inflation? Has anyone asked whether you believe the Fed can even do what it claims, or whether recession or inflation are the only choices?
Not for 40 years, since Ronald Reagan blew the Phillips Curve to bits, has inflation been a consequence of growth. Not even when Donald Trump’s 2017 tax cuts led to the lowest unemployment rate in 77 years did inflation appear.
Yet now, without consulting any democratically elected body, the Fed declares it must save us from the horror of too many people working and, horror of horrors, getting raises. Even if the Fed had the power it claims, which we doubt, have the U.S. central bank leaders asked you or your catatonic Congressperson which you prefer: losing your job or paying a few more pennies per dollar for groceries.
This is a very real question for several million American households that will be impoverished if the Fed realizes its fondest hopes. Shouldn’t they be asked? Shouldn’t their neighbors?
The government, for more than three years, under both Trump and Biden, paid people not to produce; then let Europe slide into war; then proceeded to cripple our domestic energy supply, all causing massive supply shortages. Miracles would have been required to keep prices stable.
Happily, if the government had ignored the rise in prices altogether and just stopped doing any of those bad things, a miracle was readily available in the form of an economy liberated 40 years ago to create decades of inflation-free growth.
The myth of the Fed provided an excuse for the government to do nothing. And yet doing nothing was the right solution all along. Too bad the government couldn’t accept the gift.