A focus on jobs
One of the most frequently mentioned predictions about Janet Yellen, named by President Obama as the new chairwoman of the Federal Reserve, is that she is likely to concern herself with unemployment and the need for job creation.
This would seem to be an unremarkable role for the nation’s top economic policymaker to assume. But in this politically fraught period, even an inclination to look out for the welfare of workers is controversial.
The Federal Reserve has three essential responsibilities: to promote employment, to restrain inflation and to maintain a stable currency. In the aftermath of the Great Recession, promoting employment has been the Fed’s primary focus, and with good reason. Millions of people had been thrown out of work, and economic output was plummeting. Rather than the threat of inflation, the nation faced the prospect of deflation — a death spiral of falling prices that would have tumbled the nation into a new depression.
As vice chairwoman of the Fed, Yellen had sounded early warnings about the dangers posed by the real estate bubble and the possibility of economic collapse. Her foresight is part of why she emerged as a leading candidate to become the new Fed chairwoman. She has also been a supporter of the policies of the Fed under current chairman Ben Bernanke. It is a policy that keeps interest rates low and provides economic stimulus through large-scale buying of government bonds by the Fed.
Economic stimulus is a way to keep people employed. The private sector had crashed, and companies had shed workers. The infusion of money into the economy by the government promised to boost economic activity and employment.
And yet this policy has not been without critics. Conservatives argue that the government risks inflation by piling up debt. Bernanke, Yellen and other economists argue that it is more important to address the trouble before us — unemployment and the human suffering that it causes — than to address the potential future danger of inflation.
Opposing the Fed and its policy of economic stimulus has become almost a theological position, based on theoretical and moralistic notions of economic rectitude. Yellen has concerned herself with the actual world and actual people who are paying the price for the corruption and recklessness of Wall Street. If she is confirmed as chairwoman of the Fed, she can be expected to continue the loose monetary policy of Bernanke, at least until the economy shows it is more firmly on the road to recovery.
The conservative critique of the Obama economic policy remains only loosely moored to reality. The government shutdown engineered by conservatives in Congress and the threat of default are creating real-world economic damage that is causing business leaders to question their loyalty to the Republican Party. Reporting in The New York Times shows that leading business groups worry that the runaway extremism of the tea party right could plunge the economy, and future business profits, into the abyss once again.
Meanwhile, the American people struggle to keep their heads above water. Unemployment and underemployment remain high, and wages continue to stagnate. That is the problem that stares the nation’s economic policymakers in the face. Yellen apparently understands that reality.
Ultimately, the nation will have to address long-term problems with the future solvency of Social Security, Medicare and Medicaid and the nation’s debt. At the moment the Fed and the Obama administration need to get the economy moving again, which will improve the nation’s capacity for addressing long-term problems. Already, federal deficits are falling under the Obama administration, and the rise of health care costs is slowing. The nation can afford to create the conditions for the economy to prosper once again, and Janet Yellen, unconstrained by the shackles of ideological rigidity, appears ready to lend a hand as the new chairwoman of the Fed. If the government can pass through the morass caused by the bully-boy tactics of House Republicans, the nation may once again get itself back on track.