Federal Reserve Chair Jerome Powell’s efforts to cool down the economy are causing progressive criticism to heat up. He has been accused of wanting a “brutal” recession, trying to “throw millions of Americans out of work” and using “dangerous” rhetoric. And those are the comments of just one senator, Elizabeth Warren of Massachusetts.
The criticism of the Fed’s interest-rate increases sometimes veers into demagoguery, just as did former President Donald Trump’s attacks on Powell when the Fed raised rates. But the progressives’ question deserves an answer: How can tightening monetary policy be morally justified even though it is expected to have a negative effect on employment?
What makes the question difficult is that the costs of inflation, while serious, are diffuse, while the costs associated with unemployment are highly concentrated. The costs of being unemployed are personal and often severe. They can include broken families, compromised mental health and reduced long-term prospects.
