We have just heard from new Federal Reserve Chairperson Janet Yellen in her first official speech entitled, What the Federal Reserve is Doing to Promote a Stronger Job Market. Her speech not only boosted the financial markets, but confirms the Fed will do all in its power to boost employee incomes by keeping interest rates low for as long as possible.
Why? Because she is one of the ordinary worker’s best friends—i.e., those 80 percent of the workforce that are wage and salary earners. It is really the wage and salary earners that determine the strength or weakness of any economy, because they power most consumer spending. And more jobs mean more tax revenues, hence less budget deficits and all the ills that go with deficit spending. It should have been first and foremost on President Obama's agenda from Day One of his administration--but it wasn't.
“By keeping interest rates low, we are trying to make homes more affordable and revive the housing market. We are trying to make it cheaper for businesses to build, expand, and hire. We are trying to lower the costs of buying a car that can carry a worker to a new job and kids to school, and our policies are also spurring the revival of the auto industry. We are trying to help families afford things they need so that greater spending can drive job creation and even more spending, thereby strengthening the recovery…There is little doubt that without these actions, the recession and slow recovery would have been far worse.”
She is in fact the first modern Federal Reserve Chairman that is unequivocally committed to promote real job growth. How can I say that? Firstly, because she is a top macro economist, who along with husband and Nobelist George Akerlof, have done much of the major research on the labor market.
So she understands what policies create more jobs, which until now has not been the top priority of either Congress or the Obama administration, sad to say. It should be obvious that job creation has to be the first and foremost priority of all policy makers to bring the US economy back from the worst downturn since the Great Depression.
The Federal Reserve during the 1930s understood this under then Fed Chairman Marriner Eccles, which is why we had FDR’s New Deal. But until now, even ex-Chairman Bernanke seemed to be more focused on reducing debt, the result of the Great Recession, than putting enough people back to work, in order to pay down that debt.
And Paul Krugman has been writing about the need for more job-friendly policies, including in his latest New York Times Op-ed:
He said, “Instead of focusing on the way disastrously wrongheaded fiscal policy and inadequate action by the Federal Reserve have crippled the economy and demanding action, important people piously wring their hands about the failings of American workers.
“Moreover, by blaming workers for their own plight, the skills myth shifts attention away from the spectacle of soaring profits and bonuses even as employment and wages stagnate. Of course, that may be another reason corporate executives like the myth so much.”
Dr. Yellen obviously understands this, so let us hope the Board of Governors will continue to support her effort to bring back jobs and so the middle class.
Harlan Green © 2014
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