Protect Our Economy

In July of 2023, the Federal Reserve proposed rules that could set us back by making financial markets more costly and, ultimately, hurt Americans. Families, businesses and nonprofits all rely on financial markets to finance their efforts to build for the future. Higher financing costs mean our economy recovers more slowly – leaving more families struggling and facing higher bills. The new Federal Reserve rules will add to higher costs, hurt hard-working Americans and harm American competitiveness.

Our financial markets keep our economy going, we need them open and strong.

• In 2010, Congress passed the Dodd-Frank Act to strengthen U.S. banks and safeguard the financial system. The law led to a set of new rules that require the largest U.S. banks to dramatically increase the amount of “capital,” which includes equity and debt securities, held to protect against difficult times. Since 2010, the amount of capital the largest U.S. banks have on hand has more than tripled, making U.S. requirements among the highest in the world.
• In addition, the rules require that the largest banks go through stringent “stress tests” each year to ensure each bank can handle economic shocks and continue to support the economy.
• Banks support the economy by helping individuals, companies, and institutions access financial markets to get the funding they need to pursue their goals. The U.S. capital markets are the deepest and strongest in the world – funding moves smoothly through the pipes to reach every part of the economy that needs investment. We lead the world in innovation because our financial markets make financing available to fund good ideas and ambitious entrepreneurs. We recover faster from economic downturns because financing moves quickly to where it can best restore growth. The European Union (EU), for example, has a public policy objective to develop their capital markets to be more like the U.S.

Consumers will feel the costs of the proposal.

Businesses ranging from farms, manufacturers, and small businesses to airlines and energy companies work with banks to access financial markets to finance investment and to lock in the cost of supplies and other business needs so they can keep prices lower for customers.

• Farmers turn to banks to help them lock in the price of fertilizer so they can better run their farms.
• Manufacturers turn to banks to lock in transportation costs so they can deliver better value for customers.
• Pension funds turn to banks to assist in growing retirement and pension funds for savers.
• Small businesses turn to banks for credit needs to grow their businesses.
• Municipalities turn to banks to help them obtain funding for infrastructure, education, parks, and other state-wide projects.
• Energy companies turn to banks for critical financing of clean energy projects and, in-turn, lower energy costs to consumers.
• Airlines turn to banks to help them lock in fuel costs so they can keep ticket prices more stable.

More on Financial Markets and the Fed

The COVID-19 pandemic exacerbated labor shortages across the economy.

• Many workers did not return to the workforce after the COVID-19 pandemic for a variety of reasons, including early retirements, difficulty arranging child care, and concerns for their health.
• A shortage occurs when the number of job openings is greater than the number of workers filling them. As of August 2023, there were 8.8 million openings compared to 6.3 million unemployed workers.
• The COVID-19 pandemic accelerated this trend, but the issue was always on the horizon. Workers are retiring faster than new workers are joining the workforce. This creates an unsustainable trend where essential services do not have the labor to successfully serve society.
• Recent bipartisan legislation such as the CHIPS and Science Act and the Bipartisan Infrastructure Law provided funding for infrastructure investment, but a shortage of skilled labor will delay the timeline and implementation of these projects.

Labor shortages are affecting almost every industry, passing costs to consumers.

• About 1.4 million manufacturing jobs were lost during the COVID-19 pandemic.
• The construction sector is hit one of the hardest, and the costs are pretty wide-ranging, making it more expensive to build literally anything.
• The labor shortage leads to fewer contributions for Social Security, affecting retirement plans for many Americans.
• Less workers on farms create increased food prices.
• Completion of construction projects, whether they are residential homes, infrastructure initiatives, or hospitals, is restricted by a lack of available labor.
• Shortages of public transportation employees affect anyone who commutes to work, school, to run errands, get to appointments, etc.
• Without the necessary amount of workers, healthcare systems will have an increasingly difficult time providing care to those who need it most.

More on Domestic Labor Shortage

The U.S. has always had to deal with budgeting to avoid debt.

• Every year, the federal government earns and spends vast amounts of money. If the government spends more than it brings in, that creates a deficit. If the government operates in a deficit for years at a time, the deficits accumulate to form debt.
• The United States has carried debt since its creation, when the Founding Fathers funded the American Revolutionary War. Large increases in the debt occurred during wars, recessions, and pandemics.
• Increased spending provides for programs such as Social Security, Medicare and Medicaid, unemployment and disability benefits, and the national defense.
• Like any other type of debt, the national debt gathers interest, and as the debt grows, so does the amount of interest.

The national debt is an abstract concept that affects every American.

• Current and future generations will have to manage the debt.
• The national debt is over $33.55 trillion dollars, which is over $100,000 of debt per American.
• High deficits and debt can lead to persistent high inflation, raising costs on everyday goods and services.
• Rising interest rates affect the ability of hard working Americans to get loans or take out mortgages.
• As the interest on the debt rises, the government may have to make choices about which programs to fund, potentially reducing Social Security payments and other benefits.
• Taxes could increase to raise revenue and offset spending.
• Increased government borrowing could crowd out other types of investments in small businesses, infrastructure, and manufacturing.

More on the National Debt