Counterpoint to price stabilization mandate
本文质疑美联储的价格稳定目标，指出反通胀政策对黑人家庭的成本高于白人，建议在制定货币政策时考虑种族公平。
Williams's essay poses a question that is at the center of all Federal Open Market Committee deliberations. Is it better to tolerate moderate inflation than to bear the costs necessary to achieve price stability? Macroeconomists propose metrics for evaluating such monetary policy decisions. For example, Howitt's Rule posits a target rate of inflation based on equalizing the marginal benefit of further reduction in inflation and the marginal cost of raising unemployment above the natural rate. Like most academic or theoretical models of economic policy decisions, however, these fail to account for the fact that a single policy action can generate very different costs and benefits for Black Americans and White Americans due to structural inequities that disproportionately disadvantage Black households. Therefore, if the Fed is to consider equity when setting monetary policy, a more specific question must be raised. Are Black households harmed more by elevated price levels (inflation) or by the increase in interest rates and reduction in real money balances necessary to reduce the rate of inflation (disinflation) and bring price levels within an acceptable range of the Fed's optimal inflation target (price stability)? Williams addresses this more targeted question with respect to the Fed's price stability mandate by identifying three specific examples of how the costs and benefits of monetary policy decisions are unequally born by Black and White households. These include: (1) consumption volatility, (2) disparities in debt versus assets holdings, and (3) lender selectivity and discrimination. Points 2 and 3 are arguably the more compelling of the three since they more clearly make a case for how the Fed's monetary policy decisions impact the Black–White wealth gap through persistent disparities in the relative debt and asset holdings of Black and White families. This connection is analogous to the employment side implications of monetary policy for narrowing the Black–White unemployment gap given persistent racial disparities in unemployment. On the issue of consumption volatility, Williams presents data on real expenditures of Black and White households to show that the consumption patterns of Black consumers are more volatile than those of White consumers, even during a stable price environment like that observed between 2012 and 2019. This volatility is most pronounced in categories where expenditures are more discretionary and can be adjusted more quickly (e. g., food or entertainment) than in categories, like housing, where expenditures cannot be adjusted quickly since rent and mortgage payments are contractual obligations that tend to be fixed over several months or years. Given these patterns, Williams posits that when prices are less stable, Black consumers are likely to experience more extreme consumption volatility. She further argues that while the pursuit of aggressive disinflationary measures decreases overall spending for both groups, these policies would trigger more volatility in the expenditures of Black consumers. Thus, it appears that in this example, the costs of higher inflation and the costs imposed by efforts to slow inflation both fall disproportionately on Black consumers. What is missing from this line of reasoning is an acknowledgement of the common factor in both situations. Regardless of price levels, racial unemployment disparities contribute to more volatile consumption patterns among Black households than White households through greater unemployment-induced income volatility. Based on those same factors, aggressive disinflationary measures that raise unemployment are likely to reduce income and consumption more among Black households than White households. The recent release of median household income data from the Census Bureau demonstrates the significant effect increased employment of Black Americans can have on Black income stability and offsetting the effects of inflation. Between 2021 and 2022, full-time full-year employment of Black workers increased by 1.3 million or 9%. The net effect on real median household income was a modest increase of 1.5%, while overall median household income fell 2.3% in 2022 and White median household income declined 3.6% amid a much lower increase in full-time full-year employment (Moore & Maye, 2023). In other words, although inflation grew faster than nominal wages and income, the significant increase in number of earners “stabilized” Black real median household income. Such significant growth in number of Black earners was possible because of the pandemic fiscal policy response and complementary monetary policy response. Though not referenced in the discussion about consumption volatility, lower levels of wealth among Black families also limits their capacity to smooth consumption across periods of price instability, unemployment, and income loss. Moreover, the racial wealth gap is directly implicated in Williams's second and third examples of the disparate effect of price stabilization policy. The observed difference in net worth between Black and White families reflects the fact that Black families are more likely to have greater debt holdings and lower asset holdings, including rates of homeownership, than White families. In this example, high inflation erodes purchasing power and limits borrowers’ ability to service debt since a greater share of income is required to cover non-debt expenditures. However, high inflation also reduces the real value of debt payments in the short-term. This is a benefit to borrowers and a loss to lenders since repayment is being made with money that is less valuable than when it was borrowed. Comparatively, asset holders lose to higher inflation in the short-term because taxes are paid on the nominal value of capital gains. As a result, asset holders are being taxed at a higher rate than would correspond to the real value of additional income. As the Fed raises interest rates to reduce inflation and stabilize prices, the benefit to borrowers is eroded while asset holders benefit more from higher interest rates and reduced inflation. Additionally, in Williams's third example, any potential temporary benefit to Black borrowers associated with a lower real interest rate vis-à-vis high inflation can be preempted by discriminatory lenders who apply more selective lending criteria, such as charging higher nominal interest rates to Black borrowers. Williams concludes, “the Fed's decision to engage disinflation in pursuit of price stability will create a more disparate economic environment for Black and White populations in the United States and, therefore, should be implemented with caution.” Combined with the clear employment-side benefits I presented, centering racial equity should lead the Fed to more aggressively pursue employment maximization when weighed against the costs and benefits of price stabilization policies. The tradeoff associated with such a decision is arguably less consequential in the context of moderate inflation (3.5%) versus extreme inflation (9%), but given many of the issues raised in this series of essays, should always be a serious consideration. Valerie Rawlston Wilson is the Director of the Program on Race, Ethnicity and the Economy at the Economic Policy Institute, 1225 I St. NW, Suite 600, Washington, DC 20005 (email: [email protected]).