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.
