If the Fed’s upcoming decision on whether to hike interest rates seems a little beyond your reach, you’re not alone. But economist Robert Reich wants to change that—and so does a growing group of activists, union leaders, and policy experts. Together with the Center for Popular Democracy, the AFL-CIO, and two dozen other unions and community groups, they’ve launched Fed Up, a nationwide coalition aimed at connecting monetary policy with the interests of ordinary Americans.
Fed Up’s goal is a more “pro-worker” Federal Reserve, and their first step is stopping the Fed from hiking interest rates before wages and employment have a chance to catch up with the recovery. Building on a similar action last year, the coalition began circulating a petition this week demanding the Fed keep rates low until wages and employment rise. With a combined membership strength in the millions, the coalition’s 25 groups are mobilizing ahead of the Fed’s annual symposium at Jackson Hole on August 27-29, where they plan to deliver the petition and plead their case.
By design, most of us don’t have much say over how the Fed operates. The Federal Reserve’s decisions do not have to be ratified by Congress or the president and it doesn’t rely on Congress for funding. Its leadership is also skewed pretty heavily toward the 1 percent: Of the 108 current directors of the 12 regional Federal Reserve banks, 91 come from banks and financial institutions. Just two of them officially represent workers (by law, 72 are required to represent the public).
The Fed is also incredibly powerful. Its decisions can have a dramatic impact on unemployment, wages, inequality, even who becomes president. The Fed can make it easier or harder for you to find work, pay down debt, or get a raise. Fed policy can fuel a speculative bubble, promote wage growth and full employment, or plunge the economy into deep recession—all without Congress or the president having to lift a finger.
Which is exactly why the folks behind Fed Up want working people to have a greater say over Fed operations, particularly as it considers raising rates as soon as next month. As Robert Reich explains below, that would be a big mistake:
As Reich argues, while the unemployment rate of 5.3 percent is the lowest it’s been since 2008, there’s plenty that number doesn’t show. Wage growth, for one thing, recently hit its slowest rate since 1982. In fact, wage growth has been below the Fed’s 2 percent target almost consistently since the recession ended. At the same time, while the official jobless rate has been improving, the employment-to-population ratio is nowhere near what it was when the recession began—meaning there’s a large number of Americans who have given up looking for work. According to the Economic Policy Institute (also a member of the Fed Up coalition), returning to the economy of December 2007 would mean adding three million more jobs. In other words, there are millions of Americans the recovery has not yet reached, and whom it may never reach if the Fed hits the brakes too quickly.
The mechanics of monetary policy are not typical fodder for a grassroots progressive campaign. But with the stakes this high, that probably needs to change. Depending on how the Fed acts now, the tepid recovery of the past six years could become a new normal of low growth, stagnant wages, and high unemployment—or the Fed could commit now to supporting a real recovery.
The Greek Parliament is set to vote today on reforms required for opening negotiations on a badly needed 86 billion euro bailout. Those reforms mostly include tax increases and budget cuts—conditions now painfully familiar to millions of Greeks who have already suffered through more than five years of crushing austerity.
But one part of the Greek budget that’s unlikely to be seriously cut back is defense. Which is a shame, because unlike pensions or fuel subsidies, it’s one area the government could easily afford to trim. Since the mid-1970s, in fact, and right through the last five years of fiscal crisis, Greek military spending as a percentage of GDP has been the highest among EU or NATO countries (aside from the U.S.).
That’s right: The nation at the heart of the Eurozone’s existential crisis, an economy that’s contracted by a full 25 percent since 2009 and has suffered Great Depression-level unemployment for the past five years, also has the continent’s biggest military budget. And it’s not just the budget itself. Despite participating in little more than peacekeeping operations in recent decades, Greece has the highest ratio of military personnel to population in Europe. And to this day, Greece’s 1,300-strong inventory of tanks is twice the number of the United Kingdom.
Why the massive military? Since the end of Greece’s military junta in the mid-’70s successive governments in Athens have justified the large defense budget as a safeguard against neighboring Turkey, with which Greece has fought numerous wars throughout its history. But more recently that argument has come to make less and less sense. After all, since 1952, both countries have been members of NATO, and thus bound by treaty to come to the other’s defense. And in the late 1990s when Turkey unsuccessfully attempted to join the EU, Greece’s then-Foreign Minister George Papandreou offered critical support.
But even stranger is the fact Germany has been one of Greece’s leading suppliers of arms right through the last five years. As Helena Smith reports for The Guardian, German-made weapons account for more than a quarter of Greek arms imports. Despite Germany’s critical role in demanding round after round of harsh austerity, Greece has long been its largest market for weaponry.
To be fair, Greece’s defense budget hasn’t totally escaped cuts during the crisis. Since 2009, Greece has reduced its military spending by a full 54 percent, and while that’s significant, defense still accounts for 2.4 percent of Greece’s GDP—higher than Britain, Germany, or France, all nations that, unlike Greece, have seen major combat within the last two decades. In other words, the cuts since 2009 have moved the share of Greece’s defense spending from more than 3 percent of its economy to around 2.4 percent (higher than all Eurozone nations, but just below the Pentagon).
What’s more, it seems unlikely that defense cuts will be allowed to go much further. A few weeks ago, as Greece faced enormous pressure to once again cut its pension program, the European Commission came up with a compromise. If Greece slashed its military budget by 400 million euros, it could defer the pension cut. But the International Monetary Fund reportedly balked at the proposal, and the deal didn’t go through. Greeks braced themselves for another round of deep pension cuts and Greece’s military budget—enormous for the size of the country—remained unscathed. In fact, NATO recently estimated that instead of shrinking, Greece’s defense budget may actually increase over the next year.
For the past five years, ordinary Greeks have overwhelmingly paid the price for their government’s financial misdeeds. It’s time Greece’s defense budget shares some of that pain.
AP Photo/Henny Ray Abrams Linda Sarsour, director of the Arab American Association of New York, poses for photos in front of a canvas painted by the association's youth group at its headquarters in the Brooklyn borough of New York City. F or the nationwide movement against police violence, the news of charges being brought against the six Baltimore officers involved in the death of Freddie Gray has been a welcome development. Linda Sarsour, executive director of the Arab American Association of New York and an organizer in the Black Lives Matter movement, is cautiously optimistic. “It’s a little bit of a morale booster,” she told me in an interview, “I think that this kind of gave activists in the streets that rejuvenation and that energy they need to continue doing what they’re doing.” Sarsour was in Asheville, North Carolina earlier this month for the America Healing Conference, a four-day dialogue on racial justice and community healing sponsored by the Kellogg Foundation. There...
If you haven't seen it already, James Fallows, one of our favorite writers (and long-time Prospect contributor), has a very nice write-up of our new issue over at The Atlantic. "Congrats to the Prospect for publishing material like this for a quarter-century, and may it continue," he writes. We'll do our best!
(AP Photo/Andy Manis) Sean Conard, left, of Green Bay, Wisconsin, and Shyla Deacon of Milwaukee cheer during protests at the state Capitol in Madison, Saturday, February 26, 2011. In a dramatic example of the politics of defense, protests of the governor's bill to eliminate collective bargaining rights drew as many as 150,000 people in an occupation of the capitol building. This article appears in the Spring 2015 issue of The American Prospect magazine, as a sidebar to Ann Markusen's article, " The High Road Wins ," on the results for citizens of Minnesota and Wisconsin yielded by the opposing political ideologies of their governors. Subscribe here . Celebrate our 25th Anniversary with us by clicking here for a free download of this special issue . U ntil very recently, the political cultures of Minnesota and Wisconsin seemed pretty much in step. In the 1930s, both Minnesota’s Farmer-Labor Party and the Progressive Party of Wisconsin anticipated the New Deal with their own brands of...