Whose Money Is It Anyway?
There is a question I used to ask my students on the first day of every course, and it still gets the most uncomfortable silence: when a government speaks to you, who is paying for the microphone? The answer, in a democracy, is you. That is why a ruling handed down on 11 October in a federal courtroom deserves more attention than its dry procedural language suggests.
Judge Jennifer Rochon temporarily barred the administration from spending taxpayers’ money on television ads promoting President Trump. The suit was brought by the watchdog group Common Cause and others, who argued that the ads were campaign material in a public servant’s costume, aired three weeks before the midterms on 3 November. The president’s side says the spots were simply a positive promotion of the country. The administration had already said it would stop funding the ads from public coffers, and the White House added that the president’s political committee might pick up the tab instead. Note the word “temporary”. This is a holding order, not a final verdict on the merits. But the line it draws is an old and sensible one: a government may explain what it does, and it may not use your wallet to ask for your vote.
Why does the quarrel matter so much now? Because the country is in a sour mood, and sour moods make politicians reach for whatever is nearest. A Reuters/Ipsos poll of 4,506 adults found that 78% hold the president’s policies responsible, at least in part, for the rising cost of living. Among Republicans, 57% say prices are outrunning their pay. Let me be careful here. Anger about the price of groceries is not the same thing as a change of party. Voters can grumble at the shop and still vote as they always have. But grumbling, multiplied by millions, has a way of turning into arithmetic.
The sentiment numbers tell the same story from another angle. The University of Michigan’s preliminary October index fell to 46.3 from 48.1 in September, with households expecting inflation of 4.7% over the next year and 3.5% over five. The gloom is deepest among people with lower incomes and few investments, which is hardly a surprise. When your income arrives in a pay packet and your savings fit in a drawer, a dearer pump hits you like a slap. When your wealth sits in shares, you hear about it on the news. The Federal Reserve’s household survey of 9 October describes the same split: real incomes and assets rose for many families in the earlier years, but unevenly, and those with fat portfolios gained most from rising markets while the heavily indebted feel every point of interest. That is why the American economy can look sturdy in the aggregate and feel miserable in the kitchen. Activity is held up by technology investment, by AI spending and by well-off consumers, while a large part of the public feels the floor tilting.
The Fed meets again on 27 and 28 October, with its benchmark at 3.75% to 4.00% after the unanimous quarter-point rise of 16 September. Its minutes spoke of steady growth, elevated inflation and geopolitical uncertainty. Its dilemma is a classic. Be too gentle and the cost of living sets hard in people’s expectations. Be too stern and you choke the credit that firms and families depend on. Add tariffs that push up the price of some goods, a budget carrying heavier interest bills, and wars that burn money, and you can see why nobody at the central bank is sleeping soundly.