Opinion
The Michigan Daily — michigandaily.com
4A — Wednesday, January 16, 2019
D
ecember 2018 — the
month
when
the
stock market decided
to abandon all normalcy and
descend into complete and utter
chaos. The month which instilled
fear in all Americans about
whether or not the 10-years-aged
bullish market had finally begun
to falter. The month when the
White House abandoned all of
America and decided it couldn’t
deal with this ever-so-volatile
economy, and began to argue —
of all things — about a wall.
Okay, okay, too dramatic — I
know. Still, it’s not exactly wrong
for me to say 2018 really did go out
with a bang. During the month
of December, the Dow Jones
Industrial Average plummeted
more than 15 percent before
posting a 1,086.25 point gain on
Dec. 26, 2018, “logging its biggest
single-day point gain ever.” This
surprising increase came a day
after the S&P 500 drew within 2
points of entering a bear market
— a condition wherein securities
fall by 20 percent or more from a
recent high.
Nevertheless,
the
market
stayed
resilient,
refusing
to
drop into bear territory, and
continuing said nearly 10-years-
long bullish run — the longest
such
run
in
the
market’s
history. During this time, the
unemployment rate hit historic
lows, dropping below 4 percent.
And amid such circumstances,
the Federal Reserve was quick to
raise the interest rates, especially
as indices showed inflation rising
above the 2 percent mark.
The White House was quick to
criticize the Fed’s raised interest
rates, with President Trump
lashing out, claiming that “the
only problem our economy has
is the Fed.” Now, such an action
is not exactly unprecedented, as
past presidents have been known
to bash the Fed over economic
policy, but it does beg the
question of whether or not the
Fed is making the right decision.
Before we begin analyzing
this, however, we must first
understand
the
mechanics
behind how the Fed manages
economic growth. The Fed is in
charge of maintaining the federal
funds rate — the rate at which
financial institutions, such as
banks, borrow money from one
another. This influences national
interest rates, or, simply put, the
price tag that a lender puts on the
money loaned to a borrower.
When the Fed decreases
the interest rates, the amount
of investment also increases as
people the cost of borrowing
decreases. As such, the amount
of loans demanded increases,
thereby increasing the quantity
of
money
(based
on
the
fractional-reserve
banking
system). And when the quantity
of money increases, so does
inflation.
In this way, the Fed has the
ability to adjust the economy’s
level of inflation. But why does
this matter? There exists a
model in economics devised
by economist William Phillips
—
appropriately
named
the
Phillips Curve — that posits an
inverse
relationship
between
unemployment
rate
and
inflation. While most economists
believe some level of inflation is
acceptable, they acknowledge
that when it gets out of hand,
inflation is detrimental to an
economy. By and of itself, this
must be managed so that it
doesn’t get too out of hand. At the
same time, however, if inflation is
too low, the unemployment rate
naturally increases. This dual
mandate is inherently very tricky
to work with, especially due to
many caveats. Nevertheless, a
balance must be reached.
The Fed’s move to raise
interest rates in 2017 and early
2018 were very understandable.
The United States had a booming
economy that was showing no
sign of stopping, something that
is a signal of recession. However,
as the inflation rate began to turn
upwards of 2 percent following
historic
unemployment
lows
over the summer, in December it
seemed to have stabilized around
2 percent, based on fourth
quarter data. While it definitely
is too early to declare the “war”
with inflation has been won —
especially given market volatility
in 2018 — such a trend forecasts
good things to come in 2019.
Nevertheless, the Fed still is
on track for additional interest
rate hikes in 2019, something
I think should definitely be
approached with caution. Amid
all of Trump’s complaining on
the Fed’s disruption of the U.S.
economy this past calendar year,
there actually might be some
truth to it based on recent trends.
It does appear that the economy
has begun to cool down from the
hot start it had in 2016. 2018 was
“the worst year for stocks since
2008,” with the Dow and S&P
both down by 5.6 and 6.2 percent
respectively.
If
the
Fed
were
to
overcompensate by increasing
interest rates higher than they
should be, the agency runs the
risk of creating a recession
by
unnecessarily
occluding
economic growth. At the same
time, if they undercompensate,
the Fed runs the risk of inducing
increased inflation. Both are
formidably terrible outcomes in
their own rights, but given our
current circumstance, it seems to
be a better idea to back the foot
off the brakes a little and let the
economy find its footing. This
is perhaps strengthened by the
fact that the global interest rates
are running at levels much lower
than those in the United States —
a counteracting force out of the
Fed’s control.
So despite Trump’s persistent
complaints
that
the
Fed
is
intentionally
sabotaging
his
economy, it seems the Fed has
truly been quite successful in
managing
the
inflation
rate
thus far. Whether such a trend
continues
is
determined
by
whether or not the Fed decides to
back off on further interest rate
hikes in 2019 (at least based on
market signals today).
And Trump would do well to
worry about his trade talks with
China, which arguably played a
large role in last year’s market
volatility. Indeed, seeing to a
resolution of some kind would
help start 2019 off in a positive
way.
Should the Fed be increasing interest rates in 2019?
ADITHYA SANJAY | COLUMN
Adithya Sanjay can be reached at
asanjay@umich.edu.
Emma Chang
Joel Danilewitz
Samantha Goldstein
Elena Hubbell
Emily Huhman
Tara Jayaram
Jeremy Kaplan
Sarah Khan
Lucas Maiman
Magdalena Mihaylova
Ellery Rosenzweig
Jason Rowland
Anu Roy-Chaudhury
Alex Satola
Ali Safawi
Ashley Zhang
Sam Weinberger
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EDITORIAL BOARD MEMBERS
Where politics, academia and tolerance collide
A
s a first-year student at the
University of Michigan
this past semester, I could
see
that
tolerance
was a big topic at the
University.
Incoming
students
received
notices
to
attend
tolerance-focused
workshops, heard from
their resident advisers
about the importance
of honoring differences
and, in many ways,
were made aware that
mutual respect at U-M
was vital. “Diversity, Equity and
Inclusion” seemed not only to
be a University office, but also
a mantra on campus. However,
the inverse appeared true when
it came to the vast political and
ideological diversity within the
campus culture.
Rhetoric
surrounding
intolerance, specifically political
intolerance, at our university
made international headlines in
September, when many students
and those from all sectors of
the school community felt that
a professor chose to put his
own political expression above
a student’s academic freedom.
This student, hoping to gain the
professor’s
recommendation
to study abroad at an Israeli
university, was denied — after
previously being accepted — when
the professor learned where the
student wished to study. The
professor stated he was pledging
an “academic boycott against
Israel in support of Palestinians
living in Palestine.”
Though
some
argued
the
student could have easily received
a recommendation letter from
a different professor, others in
the student body and University
leadership viewed it as a clear
violation of the student’s right to
inquiry by a politically motivated
professor.
The University administration
responded
by
revoking
his
sabbatical
privileges,
and
Elizabeth
Cole,
interim
dean
of LSA, criticized him for his
misconduct by letter, writing,
“Faculty…have
discretion
to
decline
(writing
letters
of
recommendation) for legitimate
reasons such as lack of time,
information about the student,
and
academic
assessment;
however, that discretion… does
not extend to withholding a letter
because of your personal views
regarding the student’s place of
study and then using the student’s
request as a political platform for
your opinions, both in the media
and in the classroom.”
Some
in
the
University
community felt that the professor
had a legitimate right to withhold
his recommendation on personal
moral
grounds.
However,
in
addition
to
the
University
administration, many students,
whether speaking as supporters
of Israel or as self-described
proponents of academic freedom,
applauded
the
University’s
response.
Regardless,
it
was
soon clear again that tolerance
of
ideological
and
political
difference
is
still
threatened
at U-M. Within two weeks, a
Graduate
Student
Instructor
withheld
her
recommendation
from a student who wished to
study in Israel, and
later, in a required
speaking
exhibition
for first-year students
in the School of Art
& Design, a speaker
showed a PowerPoint
slide
with
side-
by-side
pictures
of
Adolf
Hitler
and
current Israeli Prime
Minister
Benjamin
Netanyahu,
with
the words “Guilty of Genocide”
written across their foreheads.
These
actions,
viewed
as
anti-Semitic and anti-Israel by
many within and outside of the
University, are reflections of an
intolerance for certain ideological
beliefs and an inequitable passing
of
judgement.
Within
both
the required presentation and
the refusals to write letters of
recommendation is the frequently
demonstrated practice of holding
Israel to a different standard than
other states. While the Israeli
government’s actions may be
frequently subject to controversy,
it is certainly inaccurate to claim
that
it
perpetuates
genocide
against the Palestinians. Both the
United Nations and Palestinian
authorities
have
noted
the
rapid growth of the Palestinian
population
in
recent
years.
Additionally,
even
in
violent
conflict, the Israeli Defense Forces
has been known to make repeated
and constant efforts to prevent
casualties of innocent civilians
and specifically target militants
who seek Israel’s destruction.
In these repeated incidents, it
is clear that students and faculty
need to be made increasingly
aware of the necessary respect not
only for another’s race, economic
background or ethnicity, but also
for differing political stances
and worldviews. Incidents such
as these carry the power to not
only
harm
academic
inquiry
and freedom, but also the safe
environment
the
University
strives to create for students and
faculty.
In the results of a survey
published
by
the
University
in
November
2017,
U-M
researchers
recognized
the
need for “(encouraging) greater
productive interactions across
different political orientations
and ideologies,” and explicitly
stated,
“the
university
is
sponsoring a series of events
focusing on the issue of free
speech with participants from a
variety of perspectives.” These
efforts, if continued, may help
students — and faculty — to
become aware and tolerant of
other ideologies and political
stances
and
create
a
more
inclusive campus environment.
However, these measures will
not achieve their desired goals
if
political
discrimination
is
allowed to continue at the hands
of University faculty, staff and
invited guest lecturers, as these
groups not only hold positions
of power, but also serve as role
models for how students should
behave in a diverse community.
I believe positive change is
possible,
but
before
students
can be expected to change, the
University must do its best to
assure that those at the helm of
creating our U-M education also
hold up the standards we set on
campus.
The problem of intolerance,
specifically
in
the
collision
between politics and academia,
does not only exist at Michigan
and
other
college
campuses,
but on a national scale as well.
Tolerance and understanding is
often preached by citizens and
politicians on both sides of the
aisle, yet, toward their political
opponents, it is rarely practiced.
A study conducted by the Pew
Research Center in June 2016
found 55 percent of Democrats
and 49 percent of Republicans
say they maintain an unfavorable
attitude toward their opposing
party. The descriptions most
commonly used by those in each
party for those with differing
views
were
“close-minded,”
“dishonest,”
“immoral”
and
“unintelligent.”
Perhaps the most alarming
statistic of them all was 45 percent
of Republicans and 41 percent of
Democrats said the other party’s
policies “threaten” the well-being
of the United States. In a country
that is at its best when its citizens
are united, these statistics show
we have quite a bit of work to do
in healing our divided society.
The question arises: What can we
do about this?
I
propose
a
solution:
reparation can be achieved by
creating more opportunities for
dialogue and interaction between
people of differing ideological
persuasions, both as examples
for — and within — the student
body. The survey also provided
one statistic that revealed when
supporters of the two major
parties had few to no friends
from the opposing party, they
were much more likely to take on
“very cold” views of their fellow
citizens. Yet, the opposite proved
true
with
respondents
who
reported having “a lot” or “some”
friends on the other side of the
ideological spectrum.
Maybe this is where the
solution lies, nationwide as well
as at the University of Michigan.
Organized
dialogue
between
various political organizations
could potentially significantly
improve
inter-group
political
relations from the ground up.
This
could
operate
hand-in-
hand with a continued and easily
accessible series of speakers with
diverse perspectives, not just on
free speech, but on many of the
wide ranging issues that arise
in political discourse. It may
take work to convince the vast
network of ideological camps to
emerge from echo chambers and
open their hearts and minds to
others, but the positive results
we could see from a united
country and campus, seeded
with tolerance and free thought,
will hopefully prove such efforts
fruitful for all.
Noah Ente can be reached at
noahente@umich.edu.
ANIK JOSHI | COLUMN
G
ov. Gretchen Whitmer
was inaugurated on Jan.
1, 2019 and she is already
busy working on a number of
her campaign promises. From
fixing the roads to making health
care easier to access and more
affordable,
her
priorities
are
numerous. However, one was
conspicuously missing from the
list: occupational licensing reform.
Occupational licensing is the
concept that people ought to be
licensed to perform certain jobs.
In theory, it sounds appealing.
Who wants a doctor or dentist
without a license? However, in
practice, it can (and does) get
applied to far more mundane
activities, like shampooers (who
need a license to literally shampoo
hair?). Per the Institute of Justice,
in the state of Michigan, acquiring
that shampooing license would
run you about $200 and would
take 15 days short of a full calendar
year (1500 clock hours). Driving to
Indianapolis from Detroit, on the
other hand, would take you about
four hours and the state of Indiana
does not require licensing for such
a mundane task, which would
make setting up shop significantly
less arduous.
There are two other main
issues
with
occupational
licensing: their disproportionate
impact on society’s disadvantaged
and how they lead to regulatory
capture on an epic scale. It goes
without saying that the less well-
off have less money to spend on
acquiring these licenses, but what
can go under the radar is that this
effectively locks people out of
certain career paths for absolutely
no good reason other than them
not having exorbitant amounts
of money to blow on unnecessary
licenses. In addition, this kind of
licensing can be very problematic
from a free market standpoint
because it leads to regulatory
capture. Regulatory capture is
when the government creates an
agency and it ends up getting taken
over by those it was supposed to
regulate, so the agency now acts in
the best interests of the companies
represented
rather
than
the
people.
This
happens
when
occupational licensing boards are
led by industry folk. The boards
then come up with more and
more onerous regulations that do
nothing to benefit the people, but
instead benefit the corporations
and fatten their wallets along the
way.
With all of these negatives,
you might think, is any of this
necessary? Do people really need
this much time to learn how to
shampoo? Do they really need this
strong of a barrier? The answer is
no, it is not necessary, and no, we
don’t need this long to determine
the art of shampoo, and finally, no,
we do not need these artificially
inflated barriers.
You would think the existence
of
these
boards
would
be
beneficial by making work safer,
but unfortunately, you would
not be correct. An Obama-era
Department of Treasury report
puts it very succinctly: “With the
caveats that the literature focuses
on specific examples and that
quality is difficult to measure,
most research does not find that
licensing improves quality or
public health and safety.” What is
interesting to note is sometimes
this kind of licensing can directly
make people more unsafe. In
one example discussed by the
Mercatus Center at George Mason
University, additional licensing
restrictiveness
for
electricians
tends to be associated with fewer
electricians per capita, which is
associated with more accidental
electrocutions.
Now, for the good news.
Former Gov. Rick Snyder made
a lot of progress in this area by
creating a new office to focus on
ending burdensome regulation
called the Office of Regulatory
Reinvention, which eventually
issued a report on the status of
licensing in Michigan. Nearly
seven years ago, that report was
released, and it had a number of
immediate positive effects and
a number of burdensome rules
were cut (including ones that
regulated barbershop wastebasket
sizes). Better than the report
and its changes is a letter the
governor wrote to the state House
and Senate leaders, in which he
eloquently stated his desire to not
unnecessarily overregulate: “We
should enact new restrictions
only when they are absolutely
necessary to protect the public
welfare.”
Whitmer has a chance to
continue this legacy and lend
it additional support, and she
should absolutely seize it. Since
the 2012 report, Snyder slashed
seven requirements. This may
seem small, but it represents
tremendous progress on this front
and Whitmer should continue
quickly.
This is a bipartisan issue
and people all over the political
spectrum
are
working
to
make sure this kind of reform
continues to pick up movement.
Think tanks as diverse as the R
Street Institute and the Center
for American Progress both
blast
much
of
occupational
licensing done today because
many people see the problems
with it. Those on the right
can support reform because it
helps get government out of the
private sector, and those on the
left can support reform because
it helps disadvantaged members
of society.
Whitmer can become the
champion of a new generation of
regulation busters, as the ball is
in her court.
Governor Whitmer should lead on occupational licensing
Anik Joshi can be reached at
anikj@umich.edu.
It goes without
saying that the less
well-off have less
money to spend
on acquiring these
licenses
NOAH ENTE | COLUMN
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