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After a breakfast with Jay Powell, Pat Toomey has been sitting in his Washington office this week with mixed opinions about the Federal Reserve chairman.
“Look, he’s a very capable guy,” the 59-year-old Pennsylvania Republican senator said in an interview with the Financial Times. “He and I have a major disagreement about the scope of the accommodation and how long it lasts. But I do have a lot of respect for him personally ”.
Toomey has become one of the main critics in Congress of the Biden administration’s strong fiscal response and the Fed’s ultralight monetary policy, challenging the prevailing mantra of “making big” in Washington.
Toomey declined to say whether he would support Powell for a second term starting next year if U.S. President Joe Biden decides to extend the Fed’s presidency. But he made it clear where he believes the Fed is making mistakes.
The central bank is in danger of standing “behind the inflation curve” and the Fed’s insistence that the current rise in consumer prices will be temporary “requires waiting to see if it disappears,” Toomey said. “Everything increases the risk that they will end up having to take more severe measures.”
Toomey senses that a hawkish change may already be underway, after Fed officials indicated they expected rate hikes to begin in 2023, and initiated a debate on the reduction or “reduction” of purchases of central bank assets.
“The reality is that it will start to decrease. And I would be surprised if it didn’t start early next year, maybe even earlier. And I think markets expect that, and markets can absorb it, ”he added.
Toomey has been in the U.S. Senate since 2011, having previously led the Club for Growth, a conservative anti-tax group, and served in the House of Representatives.
During the interview he warned Republicans who if they choose primary candidates lined up with former President Donald Trump risk escaping their chances of gaining control of Congress in the 2022 midterm elections.
But he believes his party should have a strong case against Democrats next year, even as the economy recovers and national polls show many of Biden’s measures, including stimulus checks, remain popular.
“Every stop I make in Pennsylvania. I feel like people are really worried about wondering, “how can we spend money at this rate? It’s like someone in Washington thinks it’s Monopoly money, but it’s not,” he said.
Before entering politics, Toomey was a derivatives trader and is now the top Republican on the Senate Banking Committee and a member of the Senate Finance Committee. Together, the two groups oversee the Fed, Treasury, SEC and USTR, with key roles in drafting tax, spending and financial legislation.
Toomey was speaking on the eve of Biden agreement with a group of centrist senators on both sides to allocate an extra $ 1 billion in federal funds to infrastructure spending over the next eight years.
Toomey said he expected the deal to pass, but was still unsure about the details. He was pleased that it did not include tax increases and was limited to physical infrastructure, two key Republican demands.
But it was not clear that it would be credibly paid, he said. Funding mechanisms include better tax enforcement, unused stimulus money, as well as the sale of mobile phone spectra and strategic oil reserves.
After reaching an agreement on Thursday, he tweeted: “A framework is not legislation and the actual text is important. I look forward to reviewing it further in the coming weeks.”
One of Toomey’s biggest, but quixotic, multi-party efforts has been to reach a bipartisan agreement on arms reform. He first partnered with Democrat Joe Manchin in a proposal to demand background checks for all private arms sales in 2013, following the Sandy Hook massacre. Today, he admits that “odds are not good” for the bill to become law.
“I haven’t been very successful, persuading my Republican colleagues to do something about it,” he said, adding that the recent turmoil and financial collapse of the National Rifle Association, the main pressure group for gun owners, would do little to change the dynamic.
“If the ANR left tomorrow, there would be a replacement,” he said. “[It] it would arise because there are a lot of people who feel very strongly about their Second Amendment rights. ”
In the banking committee, Toomey has attacked what he described as the “mission” of agencies like the Fed and the SEC toward climate policy and other “ESG” goals.
And he denounces the rise of “stakeholder capitalism” as the biggest strain on Republican-business relations.
“To the extent that the business weighs in on cultural wars, so to speak, that creates tension,” Toomey said. “I think it’s a bigger problem for a lot of Republicans now than the whole Trump episode.”
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