Last Wednesday, the Federal Reserve decided to reduce interest rates by half a percentage point. It also hinted that more rate cuts may be coming later in the year. The Wall Street Journal describes how the markets initially welcomed this long-awaited move towards looser money, but then “sobered a bit.”

Markets would be wise to remain calm. The reduction in interest rates will not be enough to undo the damage that the Biden-Harris fiasco caused the economy.

In a press release announcing the rate reduction, Fed Chair Jerome Powell reiterated his belief that the U.S. economy is in a good state. Powell stated that “the U.S. Economy is fine.” Powell said, “We intend to maintain the strength of the U.S. economic system as it currently exists.”

The U.S. Census Bureau’s report on household income, health care, and poverty in 2023, released last Tuesday, indicates the opposite. The wages of workers have fallen after inflation. Lower-income workers are the hardest hit. The Wall Street Journal reported that “real median earnings for full-time employees last year decreased 1.6%, and even more so for high school graduates (3.3 %). This means that inflation has outpaced wage increases for many low-wage employees.”

The Biden-Harris economic system is causing financial hardship for American households. Census data shows that the real median household income has been lower since January 2021 and is less than what it was in 2019. According to Larry Kudlow, an economist on Fox Business News, the real median income of whites, Asians, and Hispanics grew 10 times more under Donald Trump than it did under the Biden and Harris administrations. The median income for blacks grew twice as much as the Biden and Harris amount.

The Wall Street Journal sums up the current economic situation in the following way: “The truth of the matter is that Biden inflation left most Americans worse off than they were before the pandemic.” The Census numbers show this.

John Rutledge, an economist, argues that true inflation rates fell below the Fed target over a year ago. The Fed’s excessive money-tightening measures have already hurt the economy and the current rate reduction is not enough, being less than half what was required.

Rutledge cites a Consumer Price Index component called owners’ equivalent rental, which no one pays. Rutledge claims that annual price inflation has now dropped to just 1.4 percent. The Fed “damaged the bank balance sheets” and “shut down bank loans”, unnecessarily, for at least one year. Rutledge writes that “small businesses and their workers are paying the cost.”

Behind all these numbers, there is an economic impact of Biden’s federal fiscal policies. The Fed is also responsible for the management of the financial system of the United States. In the past year, economic data has shown an unusual combination of low unemployment and rising housing prices, as well as decreasing inflation and stagnant jobs for American-born employees.

This evidence of an extremely disturbed economy is attributed in large part to the 2020 COVID-19 Measures, which caused a rapid, massive depressive effect on the economy and then triggered a positive correction that was equally quick. It is argued that the U.S. economic recovery is still a long way off.

This explanation ignores an important factor, however: the massive rise in government debt and spending after the economy recovered from pandemic lockdowns. The increase began in early 2021 and lasted through 2022. (At this point, the Democrats lost the majority in the House of Representatives, and any further increases in spending were limited, though in reality, large cuts in spending were needed.

I believe the deficit spending spree from 2021 until now is responsible for the current precarious economic situation, where numbers like rising stock markets and low employment contrast with declining after-tax incomes for workers as well as record increases in federal borrowing and consumer debt. After the pandemic, the federal government foolishly expanded spending by both government and consumers while stifling the supply of goods and services (especially) through an unprecedented increase in government regulations under Biden Harris.

These reckless and ignorant actions unleashed inflation, and the Federal Reserve’s subsequent attempts to reduce the amount of money in circulation. The Fed has now decided to reverse its course and lower interest rates. It will also suspend the money-reduction strategy of selling securities. We are told that this will lead to a “soft landing” where inflation is stabilized near the Fed’s 2 percent target per year and unemployment doesn’t rise significantly.

The fundamental problem is that federal spending and regulations are far greater than they need to be, and this suppresses the production of goods. As the records of the two previous administrations demonstrate, this is not the formula for increasing prosperity.

The Fed’s rate reductions may not even be a good thing. In general, the Fed will start reducing rates right before a downturn or even very early in a recession.

Two facts are in order: We do not appear to be in a recession at the moment (as we currently know), and the Fed is cutting interest rates and has indicated that it will continue in the months ahead.

The history suggests that the Fed may have loosened the money supply too late to stop a downturn brought on by Biden’s and Harris’s massive spending.