The fact that you're getting to final interviews means you're doing everything right, so don't give up! We've just got tons of good talent out there. We were hiring for a management position a while back, and if any of the 4 final candidates had been the only candidate, we would've been happy to hire them. But we only had one slot to hire for, so we had to reject 3 truly great candidates.
"And an income tax raises revenue, but also encourages people to work less."
Matthew, look up the income and substitution effects, and the backward bending labor supply curve. These are textbook economics. When you raise someone's after tax wage, there is a substitution effect; they now get more for substituting work for free time, but there is also an income effect; they can achieve their accustomed standard of living with less hours of work. Either effect can dominate.
If your after tax wage went from $20/hour to $25 perhaps you would work 45 hours per week instead of 40, but if it went to $1 million/hour, most people, I would guess, would work far less, maybe 40 hours per year, and spend the rest enjoying the money. Think about this; in the sweatshop era people made a fraction of today's after tax wage, and so did they work a fraction of the hours. Of course not, they worked many more hours.
Empirically, income taxes have little effect until they hit a level far higher than current, last I checked, on how many hours people work. This depends on many other factors, like culture, psychology, the structure of the economy, and so on.
Besides wages, benefits and employer attitudes shift, too. It’s not just free coffee going away, it’s WFH, flexible schedules, boss vibes shifting to “you’re lucky to work here, you dogs”.
Reading these comments, I feel like I must be in a tiny minority of Slow Boring subscribing stay-at-home-moms. But yes, lots of things can be true at once. I was very eager to be home full time when my son was born in 2022, but financial considerations, like the high tax rate on our combined income, were helpful in convincing my husband that it was a reasonable idea. At the time I was making, $90k and he was making about $300k, so relatively speaking the taxes on my salary were very high. Daycare where we live is also expensive, roughly, $25-30k per year, per child. For all the challenges balancing two busy jobs with parenting would have added to our lives, we'd probably only have netted an extra $30k per year, which for us was absolutely not worth it. Every family's calculation is different, but for us it was a matter of labor conditions providing a justification for what I wanted to do anyway.
A hyper specific observation around tax policy: in community property states like California, this penalty for filing separately is mostly eroded as our income is summed and divided equally regardless of who earns what. This is a common filing tactic for those of us on income base repayment of student loans, but I imagine that some tweaks of this at the margin (there are unnecessarily complicated impacts on our taxes from our retirement accounts, who can claim the kids, etc.) can get at the best of both worlds without removing the benefits of joint filing altogether.
Tradwife is a job. Raising children, cleaning, cooking, saving money by sewing clothes and raising fruit and vegetables, etc. all are jobs. How much of the obesity epidemic is caused by families relying on highly processed foods instead of careful attention to nutrition in meals made from scratch? What time is left over in a two-full time jobs family, especially with careers that often require overtime? I say this as someone who was a tradwife for the first four years of marriage.
I continue to have a fulfilling career at age 79. But often during my first two marriages I lost a full night of sleep in order to catch up. My current husband isn't the demanding type, he even cooks and cleans! so life finally is so great for me that again I raise fruits and vegetables and sew and cook healthy meals from scratch. I would have preferred during previous marriages to raise our four children to the best of my ability, and to better prioritize the whole family's health and happiness.
Why I made my choices (perhaps practice at recruiting husbands makes perfect :):) is a long story, as likely is the case in many variations for many other women.
I love the way Matt responds to a simplistic wishfully biased statement with a half dozen perspectives, various statistics, comments on tax and inflation policy etc.
Matt says that "an income tax raises revenue, but also encourages people to work less." That's only if the substitution effect outweighs the income effect.
Indeed, maybe I am speaking for myself but it seems to me that for the primary bread winner in a family, dWork/dTax is only negative if the Tax is already very high. At low values of the income Tax, dWork/dTax is close to zero or even slightly positive. Below a certain Tax level, I personally would try to compensate for a small increase in income Tax by doing more Work, not less. So dWork/dTax is positive. It is more like a Laffer curve type situation for me personally.
As a mom who's done various configurations of paid work since having kids (none, part-time, full-time), I appreciate that Matt writes about this issue without the usual left- and right-wing verbal tics ("Women ought to contribute to GDP!" vs. "Children need their own mothers with them all the time!" being a tiresome discourse).
Can you explain how to unsubscribe from the second daily email the “SB PM” email. I only want to read this post, but don’t want to unsubscribe from both.
EXTREMELY rare view among liberals: I think kids below school age should be with their parents, and that they aren't is part of the reason everybody is so fucked up and anxious all the time.
It's a fine line to acknowledge that reality while not also putting undue force on women to live a certain kind of lifestyle.
Right now 90% of women aren't any more free to choose whether they work or not than they were 75 years ago... they just have the opposite choice imposed on them.
I get where you're coming from -- I didn't send my kids to daycare for similar reasons. But having gone through it I think the reality is a bit more complicated.
Two aspects of demographic change have fundamentally rewritten what it is like to raise kids without daycare.
People have smaller families which means you're much less likely to have siblings or cousins to play with.
And the generally older society means your neighbors are much less likely to have children (because they are retirees or whatever) so you have fewer neighborhood kids to play with.
Daycare solves both problems via agglomeration effects and drawing from a large distance. There's a reason most parents drive to daycare and it isn't (just) before of car-centric planning. You just need hundreds of families nowadays in order to get a minimum viable number of toddlers to run a daycare so you have to draw from beyond walking distance.
My family lives in a nice, reasonably walkable, 1950s neighborhood but there are zero kids their own age within 500 metres. They go to government preschool 2 days a week now but on the other 5 days a week we almost never see any kids their age out and about before 3pm.
Then you add in flywheel effects where parents start sending their kids to daycare for socialisation because there are so few kids outside of daycare. But that leaves even fewer kids out and about during the day....
Idk, I think daycare is great for lots of kids. I have a very energetic two-year-old boy (as well as a baby) and it’s hard to imagine him getting the same level of exercise and social stimulation if he were hanging out with us all the time. We manage to mostly keep up at weekends but omfg it’s exhausting.
It's funny, but this didn't use to be a rare view among liberals. Elizabeth Warren co-wrote the Two Income Trap and this was at least a subtext for that book's thesis.
Kids do better with a parent at home isn't some crazy notion that only religious fundamentalists believe. There are dozens of us!
Telling women "you must stay home until your youngest child is 5-6 years old, lest your children grow up to be fucked up and anxious" is a fantastic way to crater the fertility rate among liberal, highly educated women.
I love my son with all my heart AND I know that if I had been told "your career or a baby but not both, choose" before I got pregnant, I would be childless right now.
You literally said "kids below school age [which, in the US, tends to be the 5-6 year range] should be with their parents." How do you propose to accomplish this without a parent (which most likely means mom) staying home full-time until children are old enough for school? Should every day be take your child to work day? That has its own problems, and is just plain incompatible with many kinds of work.
First off, and this is very important: I don't think there is any reason the caregiver parent need be a woman, or that a woman can't be the primary income source in a household with children.
I don't think there IS a way to accomplish it without a parent staying home full-time until the children are old enough for school, unfortunately. More part time remote jobs that are compatible with staying with kids would be a good thing, and if we can come up with some ways to incentivize firms to create them we should. (Maybe when we restore government employment following the Trumpocalypse we can try to turn some of those jobs to that model.)
I think people should be free to continue to both work and use daycare if they're so inclined. People don't have to agree with me.
And people might say that what you are doing is making your child anxious. That would be an inappropriate (not to mention extremely rude) thing to say in an individual situation, because they don't know you, or your child, or your family, or your career circumstances.
It is my AGGREGATE opinion that children spending more time with people being paid to watch them has not been good for the nation's psyche. (I would love to see some study of it but it's probably really, really hard to separate from correlations with a bunch of other socioeconomic/demographic factors.) You are free to disagree with that opinion, but please don't try to reframe it as some kind of sexist mandate.
And, please, remember personal context. You seem to have a fulfilling career that is personally important to you, and many - most - people don't. A lot of women are being kept away from their kids to operate cash registers.
Many, many studies have shown that children who go to pre-school are better off. They get better grades, physical and mental health, and go on to higher education and income than children who don't go to pre-school. The difference is even bigger in children from low-income families. The benefits-to-cost for society is also consistently measured to be high, sometimes as high as 7 dollars gained for every 1 dollar spent.
Well if the status quo is better than what I have in mind then that is not “sad” at all. I don’t have some ideological commitment to stay at home parenting. Or to my being right about everything.
I am well aware of the research that who go to preschool are better off but I’m not talking about preschool, I’m talking about kids 3 and under. And a hell of a lot of daycare is not “preschool,” it’s kid-warehousing.
Like, it seems to me like the benefits of preschool and the benefits of spending much more time with parents aren’t really contradictory to each other or mutually exclusive.
If anything the tax argument is stronger than the one Matt made in a lot of cases. It's not 35% for a lot of couples -- it's 35% + FICA + NIIT + State taxes vs paying child care, which if it's a nanny involves paying employer taxes (if you're doing it legally). And getting to work isn't free, there's gas & work clothes for women seem more expensive (anecdotally).
So in the case of working & paying a nanny, mothers need a huge wage premium over the raw cost of the nanny to justify that route.
Any 50 something Moms on here who can vividly remember the Mommy wars that emerged from Lisa Belkin’s 2003 article about the opt out revolution? Man, I was reading the comments at work and alternately fuming and nodding. Can’t wait to retire at a relatively young age with the defined benefit pension I earned from continuing to work and use that security to hopefully support my future grandchildren with lots of caregiving and time.
We'll take people's money, give it to the Poli Sci department, and then tell them, "Actually, no, there is no football game; you're going to sit through a lecture on American government and you're going to LIKE it."
And yeah, it is personal for me. I'm not good at sports, and I find them tedious and boring, and resent their being held up as this great and wonderful thing. Stupid old sports! We should do politics instead.
"2. Inflation has been pushed up by tariffs and deportations, not by excessive demand.
3. Therefore, Trump should probably get the interest rate cut that he’s asking for."
This chain of logic doesn't make sense. At the least, you should explain a little more what your theory of macroeconomics and monetary policy is.
MV=PQ. The Fed controls inflation by controlling the price level P which =MV/Q. They do this by managing the quantity of money M. At any given moment, the value of money is due to the intersection of money supply and money demand.
Higher inflation is always due to demand (aka money supply) being "excessive" -- given the current state of real supply. It doesn't matter at all WHY real supply is low (e.g. tariffs or deportations). It doesn't matter at all whether money supply is now too high because of recent excessive money supply growth, or else because money supply was stable but real supply declined. The reason for the imbalance is not at all important! All that is important is that there is too much money ("excessive demand"), given the current economy (real supply). And the fix is always less money (aka higher interest rates).
There is nothing at all in this logic that would ever suggest that you would lower interest rates (increase demand), in an economy where inflation is rising, and thus already has excess demand. The fact that inflation is rising "because" of tariffs and deportations is not in the least relevant to the fact that there is currently too much money for existing supply.
If you have some different theory for how monetary policy works ... you might want to offer a few sentences explaining what you're talking about.
The argument for rate cuts at this time is solely about the employment side of the FED mandate, not inflation. Everyone (except Il Duce Cheetolini) agrees that inflation is more likely than not to shoot higher in the near term but the tariff supply shock/deportations are potentially creating other dislocations which will cause job losses. So demand is about to crater even though with a slight lag relative to price hikes. The argument therefore is for the Fed to accept potential higher inflation of around 3-4% in 2025-2026 to forestall a job loss dynamic that feeds on itself.
I appreciate the very reasonable attempt at a theory. But!
Do you think higher inflation will somehow stop the tariff/deportation job losses? It seems that you do not. So the job losses will happen anyway.
Next you suggest that the job losses will cause a drop in aggregate demand, aka a drop in inflation. But even you think inflation will go higher (on its own). And you seem to be recommending that the Fed encourage inflation to be even higher than that.
But an economy can't (generally) do both. It won't simultaneously have rising inflation, and also cratering demand. So you must imagine that -- perhaps in the medium term -- inflation will be closer to 0%. So it seems like the real key is that you must think that the Fed's reaction function is far too slow. If the Fed were to maintain a 2% inflation target, then you presumably think that the Fed will be shocked and surprised in the future, when inflation drops to 0%. And to prevent that, you want the Fed to instead target 3-4% inflation now, so when this future demand crisis happens -- and the Fed can't see it and can't respond in time -- that the consequence will be inflation dropping from 4% to 2%, instead of from 2% to 0%.
But the real key is that, in the medium term, you seem to think that inflation will, in the future, drop by a couple of points ... and that the Fed will (for some reason) be unable to raise demand at that point, when the economy needs it. You want to cause known pain now, because you don't trust their competence (or at least reaction speed) in this future crisis.
That's a possible theory, I admit. It does seem kind of strange to assume that the Fed will be unable to react if (or when) demand slackens in the future, though.
You have laid out the argument pretty well. Indeed it seems to me there are two core claims behind arguing for rate cuts now, an empirical seeming one and a normative one
1. The empirical claim is that the Fed's reaction function is almost always too slow and especially under Powell who seems overly dependent on backward looking data.
2. The normative one is that it is worse for the Fed to allow unemployment to deviate from the mandate than to allow inflation to deviate. This is because job losses associated with recessions can cause permanent scarring.
There is an additional claim some are making that the Fed should implicitly abandon its 2% target altogether and allow 3% inflation here on out as a structural fact of the full employment economy.
Finally, I am not an economist so none of the above arguments, are mine, I am just summarizing what I gather, and they do not seem unreasonable to me.
I mean this makes sense. My sister’s a SAHM because she got laid off right after having her firstborn, her husband got a promotion at the same time, and their jobs had a 3-5x income disparity. Not a lot of point in her working right now unless something great fell in her lap except for role modeling - a while back her 3 year old daughter said something to the tune of “girls don’t have jobs” because, well, the women in her life don’t really. They’re grandparents and a SAHM.
Childcare wouldn’t really factor into it because the grandparents are close by. They do all the housework as is!
I'm a stay at home dad and one of my kids recently said "Mommies go to work and daddies stay at home". An awful lot really is about role modeling, I think.
The fact that you're getting to final interviews means you're doing everything right, so don't give up! We've just got tons of good talent out there. We were hiring for a management position a while back, and if any of the 4 final candidates had been the only candidate, we would've been happy to hire them. But we only had one slot to hire for, so we had to reject 3 truly great candidates.
"And an income tax raises revenue, but also encourages people to work less."
Matthew, look up the income and substitution effects, and the backward bending labor supply curve. These are textbook economics. When you raise someone's after tax wage, there is a substitution effect; they now get more for substituting work for free time, but there is also an income effect; they can achieve their accustomed standard of living with less hours of work. Either effect can dominate.
If your after tax wage went from $20/hour to $25 perhaps you would work 45 hours per week instead of 40, but if it went to $1 million/hour, most people, I would guess, would work far less, maybe 40 hours per year, and spend the rest enjoying the money. Think about this; in the sweatshop era people made a fraction of today's after tax wage, and so did they work a fraction of the hours. Of course not, they worked many more hours.
Empirically, income taxes have little effect until they hit a level far higher than current, last I checked, on how many hours people work. This depends on many other factors, like culture, psychology, the structure of the economy, and so on.
Besides wages, benefits and employer attitudes shift, too. It’s not just free coffee going away, it’s WFH, flexible schedules, boss vibes shifting to “you’re lucky to work here, you dogs”.
Reading these comments, I feel like I must be in a tiny minority of Slow Boring subscribing stay-at-home-moms. But yes, lots of things can be true at once. I was very eager to be home full time when my son was born in 2022, but financial considerations, like the high tax rate on our combined income, were helpful in convincing my husband that it was a reasonable idea. At the time I was making, $90k and he was making about $300k, so relatively speaking the taxes on my salary were very high. Daycare where we live is also expensive, roughly, $25-30k per year, per child. For all the challenges balancing two busy jobs with parenting would have added to our lives, we'd probably only have netted an extra $30k per year, which for us was absolutely not worth it. Every family's calculation is different, but for us it was a matter of labor conditions providing a justification for what I wanted to do anyway.
A hyper specific observation around tax policy: in community property states like California, this penalty for filing separately is mostly eroded as our income is summed and divided equally regardless of who earns what. This is a common filing tactic for those of us on income base repayment of student loans, but I imagine that some tweaks of this at the margin (there are unnecessarily complicated impacts on our taxes from our retirement accounts, who can claim the kids, etc.) can get at the best of both worlds without removing the benefits of joint filing altogether.
Tradwife is a job. Raising children, cleaning, cooking, saving money by sewing clothes and raising fruit and vegetables, etc. all are jobs. How much of the obesity epidemic is caused by families relying on highly processed foods instead of careful attention to nutrition in meals made from scratch? What time is left over in a two-full time jobs family, especially with careers that often require overtime? I say this as someone who was a tradwife for the first four years of marriage.
I continue to have a fulfilling career at age 79. But often during my first two marriages I lost a full night of sleep in order to catch up. My current husband isn't the demanding type, he even cooks and cleans! so life finally is so great for me that again I raise fruits and vegetables and sew and cook healthy meals from scratch. I would have preferred during previous marriages to raise our four children to the best of my ability, and to better prioritize the whole family's health and happiness.
Why I made my choices (perhaps practice at recruiting husbands makes perfect :):) is a long story, as likely is the case in many variations for many other women.
I love the way Matt responds to a simplistic wishfully biased statement with a half dozen perspectives, various statistics, comments on tax and inflation policy etc.
Matt says that "an income tax raises revenue, but also encourages people to work less." That's only if the substitution effect outweighs the income effect.
Indeed, maybe I am speaking for myself but it seems to me that for the primary bread winner in a family, dWork/dTax is only negative if the Tax is already very high. At low values of the income Tax, dWork/dTax is close to zero or even slightly positive. Below a certain Tax level, I personally would try to compensate for a small increase in income Tax by doing more Work, not less. So dWork/dTax is positive. It is more like a Laffer curve type situation for me personally.
As a mom who's done various configurations of paid work since having kids (none, part-time, full-time), I appreciate that Matt writes about this issue without the usual left- and right-wing verbal tics ("Women ought to contribute to GDP!" vs. "Children need their own mothers with them all the time!" being a tiresome discourse).
Can you explain how to unsubscribe from the second daily email the “SB PM” email. I only want to read this post, but don’t want to unsubscribe from both.
It's in the "Manage your subscription" section. Just toggle off the SB PM Notifications.
EXTREMELY rare view among liberals: I think kids below school age should be with their parents, and that they aren't is part of the reason everybody is so fucked up and anxious all the time.
It's a fine line to acknowledge that reality while not also putting undue force on women to live a certain kind of lifestyle.
Right now 90% of women aren't any more free to choose whether they work or not than they were 75 years ago... they just have the opposite choice imposed on them.
I get where you're coming from -- I didn't send my kids to daycare for similar reasons. But having gone through it I think the reality is a bit more complicated.
Two aspects of demographic change have fundamentally rewritten what it is like to raise kids without daycare.
People have smaller families which means you're much less likely to have siblings or cousins to play with.
And the generally older society means your neighbors are much less likely to have children (because they are retirees or whatever) so you have fewer neighborhood kids to play with.
Daycare solves both problems via agglomeration effects and drawing from a large distance. There's a reason most parents drive to daycare and it isn't (just) before of car-centric planning. You just need hundreds of families nowadays in order to get a minimum viable number of toddlers to run a daycare so you have to draw from beyond walking distance.
My family lives in a nice, reasonably walkable, 1950s neighborhood but there are zero kids their own age within 500 metres. They go to government preschool 2 days a week now but on the other 5 days a week we almost never see any kids their age out and about before 3pm.
Then you add in flywheel effects where parents start sending their kids to daycare for socialisation because there are so few kids outside of daycare. But that leaves even fewer kids out and about during the day....
Idk, I think daycare is great for lots of kids. I have a very energetic two-year-old boy (as well as a baby) and it’s hard to imagine him getting the same level of exercise and social stimulation if he were hanging out with us all the time. We manage to mostly keep up at weekends but omfg it’s exhausting.
"and that they aren't is part of the reason everybody is so fucked up and anxious all the time."
It's phones. Kids who went to daycare in the 80s and 90s turned out fine.
It's funny, but this didn't use to be a rare view among liberals. Elizabeth Warren co-wrote the Two Income Trap and this was at least a subtext for that book's thesis.
Kids do better with a parent at home isn't some crazy notion that only religious fundamentalists believe. There are dozens of us!
Telling women "you must stay home until your youngest child is 5-6 years old, lest your children grow up to be fucked up and anxious" is a fantastic way to crater the fertility rate among liberal, highly educated women.
I love my son with all my heart AND I know that if I had been told "your career or a baby but not both, choose" before I got pregnant, I would be childless right now.
OK, do you see how your first paragraph isn't what I said, at all???
You literally said "kids below school age [which, in the US, tends to be the 5-6 year range] should be with their parents." How do you propose to accomplish this without a parent (which most likely means mom) staying home full-time until children are old enough for school? Should every day be take your child to work day? That has its own problems, and is just plain incompatible with many kinds of work.
First off, and this is very important: I don't think there is any reason the caregiver parent need be a woman, or that a woman can't be the primary income source in a household with children.
I don't think there IS a way to accomplish it without a parent staying home full-time until the children are old enough for school, unfortunately. More part time remote jobs that are compatible with staying with kids would be a good thing, and if we can come up with some ways to incentivize firms to create them we should. (Maybe when we restore government employment following the Trumpocalypse we can try to turn some of those jobs to that model.)
I think people should be free to continue to both work and use daycare if they're so inclined. People don't have to agree with me.
And people might say that what you are doing is making your child anxious. That would be an inappropriate (not to mention extremely rude) thing to say in an individual situation, because they don't know you, or your child, or your family, or your career circumstances.
It is my AGGREGATE opinion that children spending more time with people being paid to watch them has not been good for the nation's psyche. (I would love to see some study of it but it's probably really, really hard to separate from correlations with a bunch of other socioeconomic/demographic factors.) You are free to disagree with that opinion, but please don't try to reframe it as some kind of sexist mandate.
And, please, remember personal context. You seem to have a fulfilling career that is personally important to you, and many - most - people don't. A lot of women are being kept away from their kids to operate cash registers.
Sadly, science point to your opinion being wrong.
Many, many studies have shown that children who go to pre-school are better off. They get better grades, physical and mental health, and go on to higher education and income than children who don't go to pre-school. The difference is even bigger in children from low-income families. The benefits-to-cost for society is also consistently measured to be high, sometimes as high as 7 dollars gained for every 1 dollar spent.
Links to check out:
https://www.tandfonline.com/doi/full/10.1080/14616696.2024.2310694
https://www.ifau.se/globalassets/pdf/se/2018/wp2018-19-universal-preschool-programs-and-long-term-child-outcomes.pdf
Well if the status quo is better than what I have in mind then that is not “sad” at all. I don’t have some ideological commitment to stay at home parenting. Or to my being right about everything.
I am well aware of the research that who go to preschool are better off but I’m not talking about preschool, I’m talking about kids 3 and under. And a hell of a lot of daycare is not “preschool,” it’s kid-warehousing.
Like, it seems to me like the benefits of preschool and the benefits of spending much more time with parents aren’t really contradictory to each other or mutually exclusive.
If anything the tax argument is stronger than the one Matt made in a lot of cases. It's not 35% for a lot of couples -- it's 35% + FICA + NIIT + State taxes vs paying child care, which if it's a nanny involves paying employer taxes (if you're doing it legally). And getting to work isn't free, there's gas & work clothes for women seem more expensive (anecdotally).
So in the case of working & paying a nanny, mothers need a huge wage premium over the raw cost of the nanny to justify that route.
Any 50 something Moms on here who can vividly remember the Mommy wars that emerged from Lisa Belkin’s 2003 article about the opt out revolution? Man, I was reading the comments at work and alternately fuming and nodding. Can’t wait to retire at a relatively young age with the defined benefit pension I earned from continuing to work and use that security to hopefully support my future grandchildren with lots of caregiving and time.
I would simply abolish college athletics.
We'll take people's money, give it to the Poli Sci department, and then tell them, "Actually, no, there is no football game; you're going to sit through a lecture on American government and you're going to LIKE it."
And yeah, it is personal for me. I'm not good at sports, and I find them tedious and boring, and resent their being held up as this great and wonderful thing. Stupid old sports! We should do politics instead.
Or even better yet, an economics class!!!
Political science >>> stupid old economics. 😆
"2. Inflation has been pushed up by tariffs and deportations, not by excessive demand.
3. Therefore, Trump should probably get the interest rate cut that he’s asking for."
This chain of logic doesn't make sense. At the least, you should explain a little more what your theory of macroeconomics and monetary policy is.
MV=PQ. The Fed controls inflation by controlling the price level P which =MV/Q. They do this by managing the quantity of money M. At any given moment, the value of money is due to the intersection of money supply and money demand.
Higher inflation is always due to demand (aka money supply) being "excessive" -- given the current state of real supply. It doesn't matter at all WHY real supply is low (e.g. tariffs or deportations). It doesn't matter at all whether money supply is now too high because of recent excessive money supply growth, or else because money supply was stable but real supply declined. The reason for the imbalance is not at all important! All that is important is that there is too much money ("excessive demand"), given the current economy (real supply). And the fix is always less money (aka higher interest rates).
There is nothing at all in this logic that would ever suggest that you would lower interest rates (increase demand), in an economy where inflation is rising, and thus already has excess demand. The fact that inflation is rising "because" of tariffs and deportations is not in the least relevant to the fact that there is currently too much money for existing supply.
If you have some different theory for how monetary policy works ... you might want to offer a few sentences explaining what you're talking about.
The argument for rate cuts at this time is solely about the employment side of the FED mandate, not inflation. Everyone (except Il Duce Cheetolini) agrees that inflation is more likely than not to shoot higher in the near term but the tariff supply shock/deportations are potentially creating other dislocations which will cause job losses. So demand is about to crater even though with a slight lag relative to price hikes. The argument therefore is for the Fed to accept potential higher inflation of around 3-4% in 2025-2026 to forestall a job loss dynamic that feeds on itself.
I appreciate the very reasonable attempt at a theory. But!
Do you think higher inflation will somehow stop the tariff/deportation job losses? It seems that you do not. So the job losses will happen anyway.
Next you suggest that the job losses will cause a drop in aggregate demand, aka a drop in inflation. But even you think inflation will go higher (on its own). And you seem to be recommending that the Fed encourage inflation to be even higher than that.
But an economy can't (generally) do both. It won't simultaneously have rising inflation, and also cratering demand. So you must imagine that -- perhaps in the medium term -- inflation will be closer to 0%. So it seems like the real key is that you must think that the Fed's reaction function is far too slow. If the Fed were to maintain a 2% inflation target, then you presumably think that the Fed will be shocked and surprised in the future, when inflation drops to 0%. And to prevent that, you want the Fed to instead target 3-4% inflation now, so when this future demand crisis happens -- and the Fed can't see it and can't respond in time -- that the consequence will be inflation dropping from 4% to 2%, instead of from 2% to 0%.
But the real key is that, in the medium term, you seem to think that inflation will, in the future, drop by a couple of points ... and that the Fed will (for some reason) be unable to raise demand at that point, when the economy needs it. You want to cause known pain now, because you don't trust their competence (or at least reaction speed) in this future crisis.
That's a possible theory, I admit. It does seem kind of strange to assume that the Fed will be unable to react if (or when) demand slackens in the future, though.
You have laid out the argument pretty well. Indeed it seems to me there are two core claims behind arguing for rate cuts now, an empirical seeming one and a normative one
1. The empirical claim is that the Fed's reaction function is almost always too slow and especially under Powell who seems overly dependent on backward looking data.
2. The normative one is that it is worse for the Fed to allow unemployment to deviate from the mandate than to allow inflation to deviate. This is because job losses associated with recessions can cause permanent scarring.
There is an additional claim some are making that the Fed should implicitly abandon its 2% target altogether and allow 3% inflation here on out as a structural fact of the full employment economy.
Finally, I am not an economist so none of the above arguments, are mine, I am just summarizing what I gather, and they do not seem unreasonable to me.
I mean this makes sense. My sister’s a SAHM because she got laid off right after having her firstborn, her husband got a promotion at the same time, and their jobs had a 3-5x income disparity. Not a lot of point in her working right now unless something great fell in her lap except for role modeling - a while back her 3 year old daughter said something to the tune of “girls don’t have jobs” because, well, the women in her life don’t really. They’re grandparents and a SAHM.
Childcare wouldn’t really factor into it because the grandparents are close by. They do all the housework as is!
I'm a stay at home dad and one of my kids recently said "Mommies go to work and daddies stay at home". An awful lot really is about role modeling, I think.
Ain’t it, though? They pick up on everything!