HARD EYE ON JANET
Treas. sec. nominee’s bad job on paychecks
JANET YELLEN has a great résumé to be our next Treasury secretary — Ivy league credentials in economics and vast experience at the Federal Reserve, including most recently as its chair.
What isn’t so good is her record at doing what is the most important part of any economist’s job: Helping average Americans live better and more prosperous lives.
I know this sounds like heresy given Yellen’s rep not just in mainstream economic circles but in the mainstream media. Isn’t she one of the architects of the Obama recovery following the 2008 financial crisis?
Yes, but looking back, the ObamaYellen recovery wasn’t much of a recovery. During her tenure from 2014 to 2017, particularly in the Obama years, Yellen was a devotee of Keynesian spending and keeping interest rates largely unchanged from the financial-crisis lows.
Though understated in public, she also didn’t shy away from engaging in politics. She supported Obama’s fiscal agenda — higher taxes and regulations on businesses and entrepreneurs — not pushing back against what was clearly hampering economic growth and middle-income wages.
She became a darling of the progressive left for her speech at the Boston Federal Reserve in 2014 to enact policies that shrink the country’s allegedly daunting wealth gap, declaring it “has been widening more or less steadily for several decades, to a greater extent than in most advanced countries.”
Well if that’s the case, what did she do about it?
Not much. The stock market was roaring — but gains in wages were pretty dismal for working- and middle-class Americans and the economic recovery was the weakest in modern history. The rich were indeed getting richer by snapping up financial assets supercharged by the policies of the Fed.
That is, until the fiscal-policy mix under a GOP-led Congress and President Trump changed the dynamic.
The Fed — the same agency that Yellen ran — published a study in September noting that, miraculously, the income gap began to reverse during the Trump years. The Fed’s “Survey of Consumer Finances” stated unequivocally that “between 2016 and 2019, families that were high wealth, had a college education, or identified as White nonHispanic experienced proportionally smaller income growth than other groups of families but continued to have the highest income.”
Expect Yellen to propose massive new spending, tax increases and a lot more regulation in an economy still stricken by COVID. Serving Joe Biden, Yellen will undoubtedly pressure current Fed chair Jerome Powell to keep interest rates as low as possible.
But printing money is a doubleedged sword for anyone really worried about the wealth gap. Wall Street traders love it because you can borrow cheaply and buy stocks, which is one reason why we hit Dow 30K. But middle- and workingclass savers who can’t buy stocks continue to get screwed on lowyielding investments like bank accounts.
During Yellen’s Senate confirmation hearings, Republicans will be doing a country a disservice if they don’t raise her uneven economic record, and why bringing back the old will be good for the middle class she allegedly cares so deeply about.