If you’re into stocks, politics, or just a monetary policy nerd, February 24 and 25 were really fun. If you’re an economic equity advocate or care about diversity, they were maddening.
This week Chair Janet Yellen of the Federal Reserve Board of Governors gave her Semiannual Monetary Policy Report and testimony to Congress. I know, that doesn’t exactly sound like a day at the water park, but these two seemingly routine hearings have major repercussions for the world economy. (Following the Chair’s remarks on the 24th, stocks closed at new heights. And economists now predict that the historically low interest rate will rise in autumn 2015, causing markets to shift in the meantime.)
Congressmembers who actually focused on the point at hand, monetary policy and this country’s economic health, asked specific, fact-based questions. Unfortunately, I saw so much political grandstanding that it nearly distracted me from Chair Yellen’s economic prowess at fixing problems and instead focused on whether economic inequality should be part of the larger discussion. Spoiler alert — yes, people!
The Federal Reserve System was established in 1913 to create, among other things, a central banking system independent from the influence of politics. That independence is critical, because things like job security, a fair living wage, and an economy that works for all, shouldn’t be political. In fact, I’m of the belief they’re human rights.
Yet in both hearings, Chair Yellen was dogged by Republicans for somehow being “political” (i.e. a Democrat) in her position. No, she wasn’t spotted in a Prius with an Obama/Biden ’08 Bumper Sticker. All of this “political” heat comes from her recognition of the existence and dangers of economic inequality. This inequality isn’t an opinion; It’s an economic fact that social scientists on both the left and right clearly see, and it’s one that you and I feel in our pockets. And it’s also a fact that the more unequal an economy is, the more unstable, unsustainable, and therefore unhealthy it is.
In her February 24 Senate hearing, Chair Yellen said economic inequality is what keeps her up at night, but she also said it’s in Congress’ domain to evaluate. That’s largely true. While powerful, the Fed really has only one tool, the interest rate, in its arsenal, while Congress can take a more equitable approach and target struggling groups. So why then has economic inequality continued to grow over the past 30 years? Because the discussion of economic inequality has been corrupted by some members of Congress bent on changing it from a policy issue into a political one. Acknowledging the economic fact that wealth differs significantly between ethnic groups is political because these stakeholders can be used as a proxy for left-leaning voters. In this view, acknowledging that African Americans and Latinos have far less wealth than whites equals pandering for their votes. No matter– the optimist in me believes that not all decision makers are willing to throw the principles of economics out the window just to get my black, blue collar vote.
The hearings were filled with dishearteningly inflammatory statements. During the House hearing on February 25, Rep. Michael E. Capuano (R-Mass.) literally said he was “disgusted” that Chair Yellen cared about economic inequality and “shocked” she would meet with the President or Treasury Secretary. Rep. Mick Mulvaney (R-S.C.) had a doozy of his own, questioning the rationale of the Chair to speak on inequality if she doesn’t have direct jurisdiction over it. In this way, politics reinforces inequality by tying the hands of those trying to do something about it.
We need officials who are willing to address economic inequality. And we need diverse, aware members of Congress who will work with those officials rather than taking cheap political shots.