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What recovery? Workers are telling the Federal Reserve to get real

REUTERS/Brendan McDermid
Statistics are no substitute for the stories of real people, so we’re going to tell the Fed our stories, and elevate the concerns of real workers above those of Wall Street and financial firms.

The American economy is still in bad shape, but some members of the Federal Reserve refuse to admit it. This is cause for real concern among people like me. As America’s central bank, the Federal Reserve is one of the most powerful institutions impacting working people, so what it says and does matters.

But the Fed often ignores regular people and focuses on well-off executives and bankers.

I’m 23, and I’ve been working since I was 14; for me, I’ve only known what it’s like to work in a terrible economy. The only job I could find was 40 minutes away from where I live and pays $11.50 an hour. When you factor in the cost of gas, car insurance, tires and all the little things it takes for me just to get to work, that $11.50 an hour gets a lot smaller. But it’s the best I can do, and I’ve got to do it, for my young daughter, to help out my sister who is also struggling with too few hours for too little pay at McDonald’s, and for my mother, who needs my support for her health needs. That’s the economy that I’m living in. And that’s the economy most people I know are living in.

The president of the Minneapolis Federal Reserve Bank, Narayana Kocherlakota, is one of the voices in the Federal Reserve system who understands the economy is far from recovery for most of us. Kocherlakota has said the Fed needs to strengthen the economy instead of accepting high unemployment and low wages as the new normal. I agree with him.

But there are others in the Federal Reserve — like Philadelphia’s Charles Plosser, Kansas City’s Esther George, and Dallas’s Richard Fisher — who want us to believe the economy is doing great. They think unemployment is where it should be and can’t get much lower. They say the Fed should raise interest rates because the economy has already recovered. They refuse to see the reality that many working families never experienced any recovery from the recession: Wages are still low, and there are not many well-paying jobs.

These folks need to listen to Kocherlakota and workers like me. They need to hear about the economy from people who are actually working to make a living in it. That’s why I’m going to tell them in person.

With a diverse group from around the country, I’m traveling to Jackson Hole, Wyoming, where the Federal Reserve will be meeting to discuss their upcoming priorities. When we see the bankers and Fed officials who are say that the economy is doing well, we’re going to emphasize that it’s time for the Federal Reserve to implement a full employment agenda to help reduce inequality, raise wages, and give more Americans a shot at not only entering the middle class but staying there.

Tyrone Raino
Neighborhoods Organizing for Change
Tyrone Raino

Regular workers like me weren’t invited but we’re going anyway, because we know bankers and others in attendance want to avoid topics like struggling to pay the rent and the fact that Americans across the country continue to wait for economic relief that has yet to arrive.

Statistics are no substitute for the stories of real people, so we’re going to tell the Fed our stories, and elevate the concerns of real workers above those of Wall Street and financial firms. We’re going to tell them about how and why the American economy is broken, and what it feels like not to know if you can afford to pay your bills every month or feed your kids. As Minneapolis Fed President Kocherlakota says, we refuse to accept this as the new normal.

The Federal Reserve should be doing much more to help vulnerable Americans achieve real economic security. It should be using its political power and policy tools on behalf of working people and the unemployed, instead of the wealthy elite.

At the Jackson Hole conference, Fed leaders will be talking about whether and when it should raise interest rates. If it raises interest rates too soon, it will hurt the economy and make it even harder than it already is for workers to find good jobs, get raises, and achieve real recovery.

Fed officials need to get real and reorient their agenda to working families. They need to understand that the economy is still in awful shape and take immediate steps to boost wages, reduce income inequality, and strengthen and expand our country’s shrinking middle class.

Tyrone Raino lives in Minneapolis. He is a member of Neighborhoods Organizing for Change.

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Comments (11)

  1. Submitted by THOMAS REYNOLDS on 08/21/2014 - 08:43 am.

    Recovery

    What recovery? That is the question… In 2006-2008 we talked and tried to tell the Federal Reserve all was not well in America and we were looking at a crash. The top advisors and directors of the Federal Reserve all told us what an expansive great economy we were in. It was as if they were wearing blinders. Of course the economy was doing good. Bankers, hedge funds, and the stock market were roaring. Of course this was because they were manipulating and creating a false sense of growth.

    In the real world we were talking of markets dropping, over extended credit, borrowing that was going through the roof, exports falling, with manufacturers leaving for overseas, and a middle class that was disappearing with falling wages and unemployment.

    Yes we are recovering… but when you are at the bottom was constitutes recovery. Part time jobs, better production, growth in overseas markets, stock gains from profitability, and greater inequality in the financial wealth of America. We continue with a huge national debt, adding to it every year. We will not have recovery until wages are up, GNP growth is at a steady 3-5%, and we have a solid middle class with upward mobility a possibility.

  2. Submitted by Alex Seymour on 08/21/2014 - 10:07 am.

    What Policy Steps?

    I am a little confused. What policy steps do you want the fed to do?

    The official line from the fed is that they expect to keep interest rates low until the economy recovers, which is for the foreseeable future. Wall Street, which has to put money behind what they say, believes them. Long term real interest rates are at rock bottom. One can argue that the Fed should implement real negative interest rates (interest rates below inflation). However, you can’t do that when inflation is so low and it tends to lead to asset bubbles and financial crisis.

    Maybe you are being confused by the Fed’s discussion on structural unemployment and low labor force participation. e.g., discouraged, older, low or obsolete skills, etc. Which ties into the question, what political power are you talking about? Low interest rates and easy lending won’t help these people. What is needed for those people are changes in fiscal policy (technical education, less regulation, payroll tax rebate [which is better choice than minimum wage, IMHO], etc. pick your policy), so I would recommend driving out to St. Paul or DC, not Jackson Hole.

    For a great review on “Secular Stagnation” see this e-book, whose lead article is by ex-Treasury Secretary Lawrence Summers

    http://www.voxeu.org/article/secular-stagnation-facts-causes-and-cures-new-vox-ebook

    • Submitted by Peter Palms on 08/22/2014 - 10:37 am.

      feds limited power of interest rates

      • The total amount of fiat money created by the Federal Reserve and the commercial banks together is approximately ten times the amount of the underlying government debt. To the degree that this newly created money floods into the economy in excess of goods and services, it causes the purchasing power of all money, both old and new, to decline. Prices go up because the relative value of the money has gone down. The result is the same as if that purchasing power had been taken from us in taxes. The reality of this process, therefore, is that it is a …
      HIDDEN TAX = UP TO 10 TIMES THE NATIONAL DEBT
      Without realizing it, Americans have paid over the years, in addition to their federal income taxes and excise taxes, a completely hidden tax equal to many times the national debt! And that still is not the end of the process. Since our money supply is purely an arbitrary entity with nothing behind it except debt.
      While the fed can set interest rates on its debt, it constitutes only 1/10th of the money supply. The cartel of privately owned banks that operates the fed can charge what is wishes on their loans

  3. Submitted by Todd Hintz on 08/21/2014 - 10:19 am.

    Message

    We need more people like Mr. Raino to lend their voices and share their stories not just with the Federal Reserve, but also politicians of all stripes so they know what it’s like to be poor and struggle in this economy. People need to find jobs–real jobs–and it’s tough to do when everything out there is part time with no benefits like health insurance, sick time, or room for advancement.

    At the same time we have people who claim that a higher minimum wage is unneeded or a job killer or universal health care is a socialist program that is to be avoided at all costs.

    The rich? They already have every advantage in the world. Let’s bring a little equity to the other 99% so they can live too.

    • Submitted by Alex Seymour on 08/21/2014 - 02:03 pm.

      Negative Income Tax

      Do you want good people to have jobs or some people to have good jobs?

      A minimum wage does kill jobs. In order to be employed, a worker has to provide more value than it costs to hire them. If you increase the minimum wage you know these marginally employable people out of the job market. This is particularly damaging to youth. This knocks out the lower rungs on the job ladder making it harder to ascend to higher levels. Look at France which has a very high wage rate (mostly indirectly via required job rules). Youth and minority unemployment is very high.

      Contrast that with Germany which does not a minimum wage – it will be getting one in 2015. Employment, particularly among youth, is much higher. This suggests that policies like training and unions that actually work are better suggestions.

      If you feel that people are not being paid enough, I would suggest a negative income tax, like increasing the Earned Income Tax Credit or a payroll tax rebate. It would help people with lower income without killing their jobs.

  4. Submitted by chuck holtman on 08/21/2014 - 11:13 am.

    Role of the Fed

    Mr Raino, You are articulate and I applaud your commitment, but though I am far from an expert, like Mr Seymour above I’m not sure what role the Fed and monetary policy can play in elevating the 99% or the 90%. Growth will not do it, as the real issue over the past 40 years is return to capital vs return to labor. Capital will still capture the disproportion of gains from any growth, meaning the result of growth will just be more $11.50/hr jobs that allow folks to break even. Growth also is an obsolete prescription for economic health because the environmental consequences of a growth policy are a stake in the heart of civilization. Educated citizens, a smaller economy (resulting from the civic/economic choices of an educated citizenry) and thoughtful wealth distribution policies are the components of an economically sound society. Does the Fed have a role in these realms?

  5. Submitted by Jon Kingstad on 08/21/2014 - 03:00 pm.

    Interest rates

    Mr. Raino’s objections are rightly focused on the prospect of the Federal Reserve raising interest rates:

    “At the Jackson Hole conference, Fed leaders will be talking about whether and when it should raise interest rates. If it raises interest rates too soon, it will hurt the economy and make it even harder than it already is for workers to find good jobs, get raises, and achieve real recovery.”

    The Federal Reserve has always lived in a parallel universe where “full employment” meant something like 4-5% unemployed. The Federal Reserve is supposed to regulate banks and other financial institutions, but these are functions ignored. The only real problem the Federal Reserve has ever been concerned about is “inflation”, primarily inflation in wages, for which the only solution is jacking up interest rates. I wish luck to Mr. Raino in helping Federal Reserve leaders see things otherwise, but it’s a tough sell to convince people who think they only have a hammer to see their problem is not just hitting nails.

    • Submitted by Karen Sandness on 08/21/2014 - 10:26 pm.

      The changing definitions of “full employment”

      Economics textbooks in the 1970s stated that full employment was 2% unemployment, because some workers would always be between jobs. Japan had actually achieved that level by the time I went there to study. To an American, it looked as if people were over-employed, that there were too many people doing make-work jobs, but the society was extremely stable, with almost no violent crime except for yakuza gangsters killing one another.

      Then, in the 1980s, we Americans began hearing that full employment was 5% unemployment (while Japan was maintaining 2%).

      Now I’ve heard some people say that 6% should be considered full employment.

      Rather than solving the problem of unemployment, some “experts” seem to want to define it away.

      Where will it end? What are we going to do with all those people who cannot find full-time jobs that pay a living wage? More training? We could send everyone to college (which would lead to the dumbing down of college) or job training, and someone would still have to clean office buldings and run the dishwasher in restaurants.

      Unless we can bring living wage jobs back to the U.S., we may have to look at a guaranteed income.

      • Submitted by Alex Seymour on 08/22/2014 - 08:27 am.

        To be fair, the natural rate of unemployment is a theoretical number that fluctuates. Economists have been debating for years what the right number is. But it is probably higher today. In the past, during rescissions, people would move from a bad part of the country to a better part. Today, families have negative equity in their home, dual income (i.e. it does not make sense to move across the country to find a job for one partner when the other has a job), and are older – having deeper roots in the economy.

        And we can bring back good paying jobs back to America. What we need is structural changes.

  6. Submitted by Peter Palms on 08/22/2014 - 10:33 am.

    Economic recovery

    Myth Accepted as History
    The accepted version of history is that the Federal Reserve was created to stabilize our economy. One of the most widely-used textbooks on this subject says: “It sprang from the panic of 1907, with its alarming epidemic of bank failures: the country was fed up once and for all with the anarchy of unstable private banking.” Even the most naive student must sense a grave contradiction between this cherished view and the System’s actual performance. Since its inception, it has presided over the crashes of 1921 and 1929; the Great Depression of ’29 to ’39; recessions in ’53, ’57, ’69, ’75, and ’81; a stock market “Black Monday” in ’87; and a 1000% inflation which has destroyed 90% of the dollar’s purchasing power.
    Let us be more specific on that last point. By 1990, an annual income of $10,000 was required to buy what took only $1,000 in 1914.4 That incredible loss in value was quietly transferred to the federal government in the form of hidden taxation, and the Federal Reserve System was the mechanism by which it was accomplished.
    Actions have consequences. The consequences of wealth confiscation by the Federal-Reserve mechanism are now upon us. In the current decade, corporate debt is soaring; personal debt is greater than ever; both business and personal bankruptcies are at an all-time high; banks and savings and loan associations are failing in larger numbers than ever before; interest on the national debt is consuming more than half of our personal income tax; heavy industry largely has been replaced by overseas competitors; we are facing an international trade deficit for the first time in our history; 75% of downtown Los Angeles and other metropolitan areas is owned by foreigners; and the nation is in economic recession

  7. Submitted by Ken Jopp on 08/22/2014 - 12:59 pm.

    End the Fed

    The Fed is too obviously a tool that the oligarchs use to maintain control over the rest of us. The Federal Reserve is a private corporation and not a public institution.

    But there’s a remedy to that: Nationalize the Fed and make it a public institution. Public banking is one way we can wrestle financial control from the oligarchs. If Minnesota had a state bank, which would receive the state’s tax revenues, then the state could loan the money, at nominal interest, for public works, tuition, health care — whatever. And the profits would go into the public bank–in effect, back to the taxpayers–instead of into the pockets of the private banksters. The Bank of North Dakota is a model state bank.

    http://banknd.nd.gov/
    http://publicbankinginstitute.org/

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