Cut Our Paychecks to Fight Inflation? No, Thanks

In a recent press conference, Federal Reserve Chairman Jerome Powell said something jarring about your paycheck: It’s too high. And if we’re going to fix inflation, bringing down prices is not enough. We need to reduce the amount you’re paid. When asked, “how long from here should Americans be prepared for economic pain,” Powell responded, “I mean, it really depends on how long it takes for wages and more than that, prices to come down for inflation to come down.”

Most Americans depend on a salary or wage to make ends meet. Inflation is a threat to the purchasing power of their paychecks. But somehow, the Federal Reserve sees it the opposite way. According to Powell, it’s the cost of living raises that cause inflation. According to Powell, when people who work for their money learn to live with less, then we can all be more comfortable. 

Sure, the Fed added an additional 40 percent to the money supply in just a couple of years. But that’s not causing inflation, as far as Powell is concerned. It’s you and that cost of living increase you received. Give that up, and we can bring inflation down. Only the most highly educated elitist could be so stupid.

Not everyone agrees, and wage earners are beginning to take action. The 12 unions representing Class I freight railroads recently forced management to the bargaining table to address the precipitous loss in earning power brought on by the Fed’s profligate money printing. The White House immediately saw the threat a railroad worker strike posed to Biden’s political fortunes. Biden blames much of inflation on “supply chain problems,” which certainly play a role. A railroad worker strike would have been catastrophic to Biden’s already weak efforts to fight inflation. The unions knew they had the upper hand, and they used their leverage to great effect. How refreshing to see actual labor advocacy in an era in which most unions seem more interested in protecting Democratic politicians than their members.

Under normal circumstances, an administration would have remained neutral and perhaps cautioned against setting a precedent. Courage has a tendency to be contagious. If 115,000 railroad workers can achieve real improvements to their wages by threatening a strike, other unions will eventually notice. Somebody is getting rich off of all of Powell’s funny money. Why should wage earners be the ones to suffer?

The press hailed the agreement as a Biden victory. It’s not. Not for him at least. The wage concessions will embolden other unions to threaten strikes and disruptions and further expose the moral bankruptcy of the Biden-Powell inflation strategy.

Biden needed a deal badly. And, as the saying goes, that’s how he got it: badly. The unions achieved an astonishing victory at the bargaining table, partly due to Biden’s panicky intervention. Let’s walk through some of the concessions they extracted. 

According to the National Railway Labor Conference, workers will receive a 24 percent increase in wages over five years, beginning (retroactively) in 2020. Management must cough up most of that increase immediately, 14.1 percent. On top of that, management must pay each worker five annual lump sum payments of $1,000 plus additional adjustments for healthcare premiums and health benefit enhancements. Since some of the benefit enhancements are also retroactive, the workers will immediately receive an additional $11,000.

The average rail worker will earn approximately $110,000 per year by the end of the agreement with a total compensation package averaging $160,000 per year. Don’t get angry at their success. Ask your union steward how it can be replicated at your place of work.

Using the power to create currency, Chairman Jerome Powell has made a lot of bond traders really rich—often by buying and holding mortgage-backed securities of dubious value. He has enabled Congress to fund government operations with printed money by propping up the U.S. Treasury. In 2021, for example, 40 percent of government operations were financed with deficit spending. That’s not what the Fed is supposed to be doing with its awesome power. In fact it’s pretty much the opposite of its mission to, “foster the stability, integrity, and efficiency of the nation’s monetary, financial, and payment systems so as to promote optimal macroeconomic performance.”

Yet, according to Biden, it’s not the politicians spending printed money that causes inflation. He said in March, “The American people think the reason for inflation is the government spending more money. Simply not true.” Powell seems to agree. No, according to Jerome Powell, the paycheck of the humble American wage earner is the real cause of inflation pain. That sounds counterintuitive to an ordinary wage-earner. But Powell isn’t trying to protect the wage earner. He’s trying to protect the ability of the government to spend recklessly. 

Inflation, as Reagan once said, is not caused by Americans living too well. It’s caused by the government living too well. Deficit spending, not wages, causes inflation. It’s the railroad workers, not Powell, who get that. 

Congratulations to the railroad workers for their bold victory at the bargaining table. Biden quickly caved to their legitimate demands. Now are there any other modern American unions willing to risk angering the Democratic Party to stand up for their membership?

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About Adam Mill

Adam Mill is a pen name. He is an adjunct fellow of the Center for American Greatness and works in Kansas City, Missouri as an attorney specializing in labor and employment and public administration law. He graduated from the University of Kansas and has been admitted to practice in Kansas and Missouri. Mill has contributed to The Federalist, American Greatness, and The Daily Caller.

Photo: Luke Sharrett for The Washington Post via Getty Images

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