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Covert reports: "At her Senate confirmation hearing on Thursday, Janet Yellen, the nominee to replace Ben Bernanke as chair of the Federal Reserve ... discussed the rising trend of income inequality and the threat it poses to the economy."

Janet Yellen has been tapped to lead the Federal Reserve. (photo: Mark Lennihan/AP)
Janet Yellen has been tapped to lead the Federal Reserve. (photo: Mark Lennihan/AP)


Janet Yellen: Income Inequality Is 'A Very Serious Problem'

By Bryce Covert, ThinkProgress

15 November 13

 

t her Senate confirmation hearing on Thursday, Janet Yellen, the nominee to replace Ben Bernanke as chair of the Federal Reserve after he steps down from his current term, discussed the rising trend of income inequality and the threat it poses to the economy.

This is a very serious problem, it's not a new problem, it's a problem that really goes back to the 1980s, in which we have seen a huge rise in income inequality… For many, many years the middle and those below the middle [have been] actually losing absolutely. And frankly a disproportionate share of the gains, it's not that we haven't had pretty strong productivity growth for much of this time in the country, but a disproportionate share of those gains have gone to the top ten percent and even the top one percent. So this is an extremely difficult and to my mind very worrisome problem.

She noted that there are many causes for rising income inequality, pointing to technology, globalization, and the decline of unions. "The solutions involve a multitude of things, including education, maybe early childhood education, job training, other things," she said. While the Federal Reserve can't change all of those problems, she argued, what it can do is try to bring about a strong economic recovery that creates jobs and gives people more opportunities to rise up the ladder.

But she also slammed Congress for getting in the Fed's way when it comes to bolstering the economy and creating growth that can lead to jobs, with austerity through budget cuts hurting the Fed's monetary efforts to support the recovery.

Fiscal policy has been working at cross purposes to monetary policy. I certainly recognize the importance of the objective of putting the U.S. debt, deficit and debt, on a sustainable path… But some of the near-term reductions in spending that we have seen have certainly detracted from the momentum of the economy and from demand, making it harder for the fed to get the economy moving, making our task more difficult.

She argued that instead of slashing spending now, Congress could focus on medium-term deficit reduction without "subtracting from impetus that we need to keep a fragile recovery moving forward."

Yellen is right that income inequality has been growing at an alarming rate. Since the 1970s, the richest 20 percent of Americans have seen income grow much faster than for the bottom 20 percent, and their incomes are now eight times higher than at the bottom. But things have accelerated in the years after the recession. Over the past three years, the top earners saw income grow by 5 percent while everyone else saw it decline. The top 10 percent of Americans took half of the country's income home last year, the largest amount on record. Meanwhile, the bottom 60 percent of earners have seen a "lost decade" in wage growth, with compensation falling or stagnating. This inequality has many causes: the decline of unions, different tax treatment for investment income, and deregulating Wall Street among them.

And she's also right that American austerity measures aren't helping the economy grow. Sequestration, the automatic budget cuts that went into effect in March, has hurt growth and gets worse next year. Without those cuts, the budget outlook would look much better and the economy could add as much as 1.2 percent to GDP growth and 1.6 million jobs.

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+30 # AndreM5 2013-11-15 15:11
Wow.
I have to confess that what she said is blatantly obvious fact, but it is more than I expected her to say in public, much less to Congress, where plain facts are disdained.
Wow.
 
 
+19 # Ray49 2013-11-16 00:14
AndreM5 is right on--it will be such a miracle if we can get such clarity back in gov't. It is so refreshing that she spoke a challenge to truth and power publicly.
 
 
+21 # California Neal 2013-11-16 01:10
I agree with Andre & Raymond. I would add that what she's saying--& what another Cal professor, Robert Reich, says all the time--is that the 90% or 99% need more money in their pockets to spend in order to lift the economy for everyone. This is the time for government hiring & project funding, & for raising taxes on the wealthy, which have dropped precipitously since 1980. And it's not the time for sequestering, & other counter-product ive & premature deficit reduction.
 
 
+7 # tomo 2013-11-16 12:53
Like Andre, I am surprised at Yellen's candor. I hope it doesn't lead to her rejection. As to the truth of what she says, it is, as Andre points out, almost a truism. As the middle class shrinks, the ability of Americans to soak up the abundance of goods provided in the American marketplace shrinks with it. Also, as fewer and fewer Americans share in the productivity-bo nanza, there is less and less loyalty to the system that produces it. Translation: crime increases. It is naive to think that police and prisons can contain the consequent disorder. Clearly they cannot. Just as climate change is written all across the evening news, so too are the loosening bonds of order.
 
 
+6 # RMDC 2013-11-16 09:49
Everyone says income inequality is a big issue.

Everyone says it but no one in government wants to do anything about it. The solution is easy. It is in the tax code. In the 50s, when there was much less income inequality the tax code was radically progressive with the top tax rate at about 90% of marginal income. Why not go back to that. It worked. It created the middle class.

Yelling did not say we need to end Reaganomics or supply side economics. In fact, she supported it strongly by saying she would continue to stuff $85 billion a month into the supply side or the investor class. She said the economy was still to weak and fragile to cut them off. Well, why cut off the demand side, the 99% of people who are really hurting.

The economy is weak for middle and lower income people. It is super strong for the rich. the stock market is higher than it has ever been. The problem is not "income inequality." The problem is the DIRECT TRANSFER OF WEALTH FROM THE POOR TO THE RULING ELITES BY GOVERNMENT POLICY.

The QE gift of $85 billion a month is a transfer of wealth to the very rich. Yelling is committed to keeping it going.

Why not transfer $85 billion a month to the poor. This would end poverty in the US in six months. And it would stimulate the whole economy.

Yelling is just more the same old economic shit -- Reaganomics or pumping up the very, very rich. She's a trickle downer.
 
 
0 # RLF 2013-11-18 07:19
It is the plain facts she is leaving out...such as the fact that for the last thirty years one of the principal stats that the fed (under her and her bosses) has kept control on is "income inflation". They have concentrated for years to keep salaries low and growing slowly and now she conveniently ignores the fact and pretends that she wants to make jobs. She might but she wants the pay to be low to please her corporate masters.
 
 
-32 # egbegb 2013-11-15 20:15
RSN will die because its title (Reader Supported News) belies its mission (progressive ideology without exception). Hire a conservative and RSN will survive. Otherwise, y'all should be looking for jobs. I am a 3 or 4 year subscriber. Never contributed because no alternative views were published.
 
 
+4 # joe_me 2013-11-16 14:26
Go to Fox News the alternative view you are seeking will be found there.
 
 
+1 # RLF 2013-11-18 07:21
Plenty of places to get that view...like...E VERYWHERE!
 
 
+5 # handmjones 2013-11-16 07:27
Our problem is with the the very rich, the 1%. We motivate the rest with little raises in salary and rank. It works. Even in communist Russia they could motivate atomic scientists, architects and all with a salary scale that went only to 20 or so times basic. But once you are on the Board, in the Club, you sit around and award each other hundreds of times that which is necessary to motivate.
We have a graduated income tax. Escalate it to 100% on the marginal dollar at some ridiculous level, say $20,000,000. Stop up all the loopholes. Every dollar of profit to be taxed as income in someone's hands. Come January reassess the amount that should have been collected to cover what the pols spent and move the 100% point up or down to cover. Either get every country on Earth to join the move or put in strict currency controls. Eventually, institute a wealth tax to bring us all back closer to what we what we can regard as an appropriate distribution. Obviously, a task for Congress, not the Federal Reserve but do we the 99% have any representation there?
 
 
-4 # Penn 2013-11-17 08:20
Income Inequality is the new slogan to open the door for Communism. It is as much a lie as Communism has always been. Get Government out of the way, and disband all Unions so the free market will reward the workers and punish the slugs. Stop coddling the lazy unions workers and this country's collective income will rise.
 

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