It looks like Janet Yellen will have no problem tackling one of Ben Bernanke's most important jobs: shaming Congress for ruining the economy.
Yellen reminded lawmakers of their sheer terribleness during a Senate Banking Committee hearing on Thursday about her nomination to replace Bernanke as chair of the Federal Reserve when his term ends in January. Republican senators moaned and groaned, as usual, about the Fed's extreme easy-money policies. Yellen reminded everybody that Congress has forced the Fed to act by constantly imposing harsh austerity measures on an economy still recovering from a financial crisis and deep recession.
"Fiscal policy has been working at cross purposes to monetary policy," Yellen said. "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.
"We are worried about a fragile recovery, and a more supportive fiscal policy, or one that at least had less drag, that did no harm, would make life easier," she added later.
Yellen was referring to the austerity that has come out of a rolling series of debt crises instigated by Republicans in the past few years, including the deep budget cuts known as sequestration and this year's payroll-tax increase. Under pressure from Republicans, the federal government has cut spending at the fastest pace since the end of the Vietnam War. Government investment has tumbled to its lowest level as a percentage of GDP since 1948.
This belt-tightening has probably cost the economy nearly 2.5 million jobs, according to a recent study by the Center For American Progress, a liberal think tank -- one huge reason this has been the slowest job-market recovery since World War II. Economists on the right and left agree austerity has hurt economic growth, employment and consumer spending, with executives from Walmart and Cisco among the most recent capitalists to complain about it.
The sluggish recovery is also making income inequality worse, Yellen pointed out, depriving poor and middle-class Americans of more and better job opportunities.
"This is an extremely difficult and to my mind very worrisome problem," Yellen said of inequality.
Bernanke, himself a Republican, has made it a habit this year to complain about Congress at every Congressional hearing in which he appears. The Fed's monetary policy committee has mentioned the drag from fiscal policy in every one of its policy statements since March of this year.
So Yellen is just keeping up what has become a depressing Fed tradition: begging Congress for help. The problem is that Congress couldn't care less.
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