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January 16, 2019 - Image 4

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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

FINNTAN STORER
Managing Editor

Stanford Lipsey Student Publications Building
420 Maynard St.
Ann Arbor, MI 48109
tothedaily@michigandaily.com

Edited and managed by students at the University of Michigan since 1890.

MAYA GOLDMAN
Editor in Chief
MAGDALENA MIHAYLOVA
AND JOEL DANILEWITZ
Editorial Page Editors

Unsigned editorials reflect the official position of The Daily’s Editorial Board.
All other signed articles and illustrations represent solely the views of their authors.

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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