Most economists believe that the Fed has the tools to control inflation today by raising interest rates. However, one needs to face the fact that the amount of America’s debt may make fighting inflation harder than in the past. A few fiscal facts are important to bear in mind. Federal debt held by the public is now $23 trillion, or 100 percent of GDP, and a large share of that debt is short term (30 percent has a maturity of a year and over 60 percent a maturity of four years). Therefore, any increase in interest rates sufficient to fight inflation would quickly lead to large increase in interest payments.
The federal government is drowning in a sea of red ink, with deficits in the past two years—about $6 trillion between them—the highest on record and uncontrolled deficits projected as far as the eye can see. Americans are starting to feel the pain of an economy awash in federal spending, which includes the highest inflation in 40 years. Typically, the political debates about this issue have focused on questions such as whether billionaires are taxed enough, whether the government spends too much on national defense, or whether new spending initiatives will be fully paid for with new taxes.
No matter how well intended, all government regulations create unintended consequences. The buildup of rules over time can distort business investment choices, deter innovation, hinder productivity, and slow economic growth, thereby reducing output and welfare. Compounding the problem, organizational and political incentives inherent to bureaucracies lead regulators to continually create new rules while often paying little attention to past regulations that over time may have become outdated, redundant, or conflicting. Such “regulatory accumulation” can particularly harm low-income households and would-be entrepreneurs.
Land use authority is not a purely local prerogative. It takes place within an institutional framework defined and regularly adjusted by the state. When warning signs emerge, such as the dominance of PUD regulation in growing metropolitan suburbs, the legislature should consider adjustments to those institutions to ensure that local land use authority can be used in ways that are fair, protect property rights, and serve the interests of Minnesotans.
DHCD has to make choices on all these questions, and it has largely made defensible and fair choices. In many cases, there are several possible approaches that are equally valid. For instance, the “reasonable size” calculation could have been scaled relative to jobs, home prices, population, land area, number of transit stations, or—as DHCD chose—housing units.
