Using the Ten Principles to Analyze a Challenging Economic Issue

The article I have pick is this:
The Inflation Surge
Republicans should be worried about the impact on real earnings.
By The Editorial Board
Feb. 14, 2018 6:58 p.m. ET
The Wall Street Journal
New Federal Reserve Chairman Jerome Powell can thank predecessor Janet Yellen for another parting gift: rising prices. The Labor Department reported Wednesday that consumer inflation rose 0.5% in January, or 2.1% over the past year, a bigger spike than most economists predicted.
The markets reacted better than expected with stocks rising after early losses. But the yield on the 30-year Treasury bond popped above 3.16% and is near its two previous peaks of the past three years. The yield on the 10-year Treasury note also climbed above 2.9%. The cost of money is going up, which by itself isn’t alarming as economic growth accelerates.
The bigger question is whether the Fed is repeating its mistake from the early 2000s when it kept interest rates too low for too long even as the economy surged after the 2003 tax cut. This fed the housing bubble, commodity price spikes and a general financial mania that ended in panic and crash.
The January report is at least a warning. Core prices, which exclude food and energy, were more restrained, rising 0.3% for the month, or 1.82% over the past 12 months. The price of oil rose above $66 a barrel in January and has since fallen below $61. But the overall increase in prices is still notable amid modest wage gains.

The price trend of recent months should certainly rid the Fed of any residual deflation worries. That delusion drove the monetary mistakes of 2003-2005. Recall Ben Bernanke’s famous speech in late 2002 in which he warned of deflation even after the GOP midterm election victory and plans to cut taxes were developing. The current Fed has stuck to its accommodative policies because prices haven’t climbed above its 2% inflation target, and some on the Federal Open Market Committee have wanted to push even past 2%.
The potential game-changer now is faster economic growth from the new policy mix of tax reform and deregulation. The Fed has been operating under the assumption of Obama -era “secular stagnation,” in economist Larry Summers ’ phrase, and even today it is assuming tax reform won’t help growth. New York Fed President William Dudley said recently that growth in 2018 will increase to 2.75% but tax reform will hurt the economy overall.
But what if he’s wrong and growth does accelerate above 3%? Mr. Dudley and Ms. Yellen have left Mr. Powell to play the bad cop and raise rates faster to avoid a rerun of the Alan Greenspan-Ben Bernanke mid-2000s.
The political risk of rising prices is clear from the Labor Department’s other report Wednesday on real earnings. Average hourly earnings for production and nonsupervisory workers—that is, Trump voters—fell 0.5% for the month. Average wages rose modestly but that was erased by the increase in consumer prices. One reason Americans were never thrilled by the GDP growth of the Bush era is because earnings gains were undercut by rising food and energy prices.
Faster growth amid tight labor markets should lead to higher wages, but the Fed needs to make sure the gains aren’t stolen by higher prices. That’s what has happened in the United Kingdom, where inflation is above 3%. The Tories can tell you how that played in last year’s election. Ms. Yellen recently said she regretted not being reappointed to a second term as Fed Chair, but she is underestimating the challenge she left Mr. Powell.
Appeared in the February 15, 2018, print edition.
Prepare a paper on this article/video in which you explain why you chose it. What made this issue important to you?
Then identify which of the Ten Principles this article relies on. Does this article/video reject any or all of the Ten Principles?
In your analysis of the article/video and the Ten Principles, be sure to rely on at least two high-quality professional or academic articles on the same issue.
This paper must include:
Your introduction, summary and understanding of the initial article/video
A short discussion of your research and conclusions you were able to draw from it.
An explanation of what you learned and how you will use this new understanding.
Write a two to three (2-3) page paper in which you:
Write an introduction for your paper explaining what the topic is, why the topic in the article/video is important to you, and why you think others should try to understand it.
Write at least one paragraph summarizing the key points made in the article/video.
Identify and explain how Mankiw’s 10 Principles are foundational to the issues discussed in the article/video.
Find two other high-quality professional or academic quality articles on the same topic. Identify what these articles contribute to understanding the topic or issue and whether they agree, do not agree, or somewhat agree/disagree with the initial article.
Write a conclusion that explains what you learned about the topic and what conclusion you draw from your research on the topic.
Use at least two (2) quality resources in this assignment.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA formatting. Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.