Janet Yellen, chairman of the Board of Governors of the Federal Reserve System, recently delivered a speech on economic inequality in America. We should be shocked, shocked - no, not really - that mere mention of economic inequality would stir up controversy among those who deny that this is a problem, or even that it exists.
The title of her speech was "Perspectives on Inequality and Opportunity from the Survey of Consumer Finances." It was delivered at a conference held by the Federal Reserve Bank of Boston, the theme of which was "Economic Opportunity and Inequality."
From the outrage expressed by some critics, you would think that her speech was some radical, left-wing diatribe urging mass rebellion. It wasn't. Yellen's discourse was a carefully-delivered speech, laden with well-documented facts about rising economic inequality in America. Controversy generated by her speech was not just about rising economic inequality, but whether simply addressing this topic was stepping outside her realm of responsibility.
Let us recall that the role of the Federal Reserve System is to promote economic growth and employment, while maintaining a relatively stable price level. The major tools available to the Fed are its influence of availability of money and credit in the economy. Thanks to the abandonment of the Congress in instituting a properly counter-cyclical fiscal policy to stabilize the economy, the Fed Chair is widely acknowledged as the nation's most powerful and influential economic position.
The policy tools of the Fed with which to deal with economic inequality are, for practical purposes, non-existent. But as the Fed Chair is the most powerful and influential economic position in the nation, Yellen is not only within her realm but, indeed, has the responsibility to speak out on the issue of economic inequality as it affects the nation's economy.
The vast majority of professionals and laymen agree that economic inequality has increased in recent years to the extent not seen since the 1920s, prior to the Great Depression. While economists cite statistics showing this, typical working people see it and feel it through incomes that have remained stagnant though several decades - this while incomes of the nation's very wealthiest continue to increase at double digit percentages.
There still remain a few critics who deny that income and economic inequality is increasing. Others agree that while the income and wealth gap between America's super wealthy and everybody else is increasing, it's no problem - even arguing that it is a good thing, "rewarding those who are more productive." Others contend that even if income and economic inequality exists, and might be a problem, there is nothing that government policy can or should do about it.
And still others, like critics of Yellen's speech, criticize her and other economists for even mentioning it. It's clear that they want to keep this discussion off the national agenda. For example, a member of the conservative American Enterprise Institute wrote that Yellen is "in danger of becoming a political hack."
Hold on a minute - Yellen's speech was hardly a firebrand, bomb-throwing rant. In fact, she didn't even affirm that income-inequality is a problem. She was most prudent, confining herself to the bland statement that it is "appropriate to ask whether this trend is compatible with values rooted in our nation's history."
That is about as benign as one can get. But our conservative critic wasn't through. He further railed that "she has waded into politically choppy waters."
Maybe so, but this critic suffers from short memory, has a double standard, or both. It was a previous Fed Chair Alan Greenspan who openly shilled for George W. Bush and his proposed tax cuts. This from the Fed Chair who during his entire career railed against federal budget deficits, only to change his tune when the now-forgotten budget surpluses accumulated under the Clinton administration were proposed to pay down the federal debt.
So, the same critics who applauded Greenspan's open support of tax cuts now criticize Fed Chair Yellen for merely questioning whether rising income inequality is consistent with America's historical values.
Greenspan's successor, Ben Bernanke, steered clear of the topic of income inequality. His successor, Yellen, is well within her realm of responsibility to speak to this issue. Although she declined to explicitly say that it was bad for the economy, one can infer from her remarks that she believes it to be a relevant issue, and a problem.
Most economists, certainly including myself, believe this nation's increased concentration of wealth to be a serious drag on economic recovery. And as I wrote in my previous column (Nov. 14), I believe it to be a major factor in the sour mood of the country, having contributed to the Democratic disaster of Nov. 4.
Regarding that disaster, it matters not that an increased minimum wage is viewed favorably by substantial majorities in the states in which it was on the ballot, indicating that voters see wage stagnation as an issue. And it matters not that they voted against the same Democrats who, more than Republican politicians, favor a higher minimum wage.
What matters is that Democratic candidates failed to address in a bold, major way, income stagnation and rising inequality, and what they propose to do about it. Given the witches brew of adverse circumstances, Democrats probably would have lost anyway. But by failing to address the issue of stagnant incomes and hollowing out of our middle class, they guaranteed Republican victory.
Let's be clear - the Republicans didn't constructively address stagnant middle class incomes, economic inequality, or anything else, either. But they didn't have to. The party not in the White House wins just by tapping into existing discontent. That may not be "fair," but that's politics, that's life - that's the way it is.
But certainly, Fed Chair Yellen was right to address the issue of rising economic inequality, and should be commended for doing so.
- John Waelti's column appears every Friday in the Times. He can be reached at jjwaelti1@tds.net.
The title of her speech was "Perspectives on Inequality and Opportunity from the Survey of Consumer Finances." It was delivered at a conference held by the Federal Reserve Bank of Boston, the theme of which was "Economic Opportunity and Inequality."
From the outrage expressed by some critics, you would think that her speech was some radical, left-wing diatribe urging mass rebellion. It wasn't. Yellen's discourse was a carefully-delivered speech, laden with well-documented facts about rising economic inequality in America. Controversy generated by her speech was not just about rising economic inequality, but whether simply addressing this topic was stepping outside her realm of responsibility.
Let us recall that the role of the Federal Reserve System is to promote economic growth and employment, while maintaining a relatively stable price level. The major tools available to the Fed are its influence of availability of money and credit in the economy. Thanks to the abandonment of the Congress in instituting a properly counter-cyclical fiscal policy to stabilize the economy, the Fed Chair is widely acknowledged as the nation's most powerful and influential economic position.
The policy tools of the Fed with which to deal with economic inequality are, for practical purposes, non-existent. But as the Fed Chair is the most powerful and influential economic position in the nation, Yellen is not only within her realm but, indeed, has the responsibility to speak out on the issue of economic inequality as it affects the nation's economy.
The vast majority of professionals and laymen agree that economic inequality has increased in recent years to the extent not seen since the 1920s, prior to the Great Depression. While economists cite statistics showing this, typical working people see it and feel it through incomes that have remained stagnant though several decades - this while incomes of the nation's very wealthiest continue to increase at double digit percentages.
There still remain a few critics who deny that income and economic inequality is increasing. Others agree that while the income and wealth gap between America's super wealthy and everybody else is increasing, it's no problem - even arguing that it is a good thing, "rewarding those who are more productive." Others contend that even if income and economic inequality exists, and might be a problem, there is nothing that government policy can or should do about it.
And still others, like critics of Yellen's speech, criticize her and other economists for even mentioning it. It's clear that they want to keep this discussion off the national agenda. For example, a member of the conservative American Enterprise Institute wrote that Yellen is "in danger of becoming a political hack."
Hold on a minute - Yellen's speech was hardly a firebrand, bomb-throwing rant. In fact, she didn't even affirm that income-inequality is a problem. She was most prudent, confining herself to the bland statement that it is "appropriate to ask whether this trend is compatible with values rooted in our nation's history."
That is about as benign as one can get. But our conservative critic wasn't through. He further railed that "she has waded into politically choppy waters."
Maybe so, but this critic suffers from short memory, has a double standard, or both. It was a previous Fed Chair Alan Greenspan who openly shilled for George W. Bush and his proposed tax cuts. This from the Fed Chair who during his entire career railed against federal budget deficits, only to change his tune when the now-forgotten budget surpluses accumulated under the Clinton administration were proposed to pay down the federal debt.
So, the same critics who applauded Greenspan's open support of tax cuts now criticize Fed Chair Yellen for merely questioning whether rising income inequality is consistent with America's historical values.
Greenspan's successor, Ben Bernanke, steered clear of the topic of income inequality. His successor, Yellen, is well within her realm of responsibility to speak to this issue. Although she declined to explicitly say that it was bad for the economy, one can infer from her remarks that she believes it to be a relevant issue, and a problem.
Most economists, certainly including myself, believe this nation's increased concentration of wealth to be a serious drag on economic recovery. And as I wrote in my previous column (Nov. 14), I believe it to be a major factor in the sour mood of the country, having contributed to the Democratic disaster of Nov. 4.
Regarding that disaster, it matters not that an increased minimum wage is viewed favorably by substantial majorities in the states in which it was on the ballot, indicating that voters see wage stagnation as an issue. And it matters not that they voted against the same Democrats who, more than Republican politicians, favor a higher minimum wage.
What matters is that Democratic candidates failed to address in a bold, major way, income stagnation and rising inequality, and what they propose to do about it. Given the witches brew of adverse circumstances, Democrats probably would have lost anyway. But by failing to address the issue of stagnant incomes and hollowing out of our middle class, they guaranteed Republican victory.
Let's be clear - the Republicans didn't constructively address stagnant middle class incomes, economic inequality, or anything else, either. But they didn't have to. The party not in the White House wins just by tapping into existing discontent. That may not be "fair," but that's politics, that's life - that's the way it is.
But certainly, Fed Chair Yellen was right to address the issue of rising economic inequality, and should be commended for doing so.
- John Waelti's column appears every Friday in the Times. He can be reached at jjwaelti1@tds.net.
