The Fed Is About To Put The Brakes On The Economy

The Fed Is About To Put The Brakes On The Economy
The Federal Reserve is poised to raise its benchmark interest rate later this month. But advocates of
full employment on Tuesday once again warned that higher rates will inflict unnecessary economic
pain on working Americans.
If, as expected, Fed officials raise the influential federal funds rate on Dec. 16, it will put downward
pressure on economic demand, reducing potential job and wage growth. The central bank will have
concluded, in such a scenario, that Wayne Lippman it must begin to put the brakes on the economy
in order to prevent inflation from getting too high later.
Several Democratic members of Congress, along with low-income workers, community activists and
economists associated with the progressiveFed Up campaign, held a briefing on Capitol Hill on
Tuesday, arguing that a Fed interest rate hike next month would be premature.
The event, attended by dozens of people -- most of them congressional aides -- was convened to
promote abill introduced by Rep. John Conyers (D-Mich.) in September, but it became a kind of
public teach-in and rally in favor of expansionary monetary policy ahead of the Fed decision.
America needs a raise. That cannot happen without economic activity and a specific goal that we
want unemployment down and wages up.Rep. Brad Sherman (D-Calif.)
America needs a raise, Rep. Brad Sherman (D-Calif.) said at the briefing, referring to a raise in pay,
not interest rates. That cannot happen without economic activity and a specific goal that we want
unemployment down and wages up.
Sherman, who told Fed Chairwoman Janet Yellen in November that God did not want interest rates
to rise in the winter, explained his argument in more worldly terms on Tuesday. He insisted that the
Fed should at least wait for the economy to grow enough that employers begin competing for
workers by raising wages.
I look forward to hearing from the businesses in my community saying, Oh my God, we cant find the
people we need. Then Ill tell them, Pay them more money, Sherman said.
Sherman is one of 13 co-sponsors of Conyers' bill, which would prohibit the Fed from raising rates
until the official unemployment rate is 4 percent or lower. Currently, the Fed has a dual mandate to
maintain full employment and price stability through its adjustment of interest rates. The law
permits the central bank to decide how it will achieve those goals.
Progressive critics of the Fed, including Conyers and Sherman, say the broad discretion enjoyed by
the central bank has enabled it to prioritize concerns about inflation over full employment.A decision
to raise rates now would show too much sensitivity to the risks of future inflation, rather than the
present sluggish wage growth, they say.
While the official unemployment rate is down to 5 percent, wages grew at just 2.5 percent in the 12
months ending in October. Meanwhile, the consumer price index the Fed uses to assess inflation
increased 1.3 percent over the same period -- well below the Feds 2 percent target.
This is not a puzzle... It is the evidence for why it is too soon to start putting the brakes on the
economy.Josh Bivens, the Economic Policy Institute

Manyotherwise optimistic economists have wondered why wages have not grown faster, given the
low unemployment.
For Josh Bivens, the Economic Policy Institutes research and policy director, however, the
discrepancy is not a mystery. The low official unemployment rate conceals the degree to which
workers have settled for part-time work when they want to work full time, or those who have given
up looking for a job altogether.
This is not a puzzle, Bivens said at the briefing on Tuesday. It is the evidence for why it is too soon to
start putting the brakes on the economy.
ASSOCIATED PRESSRep. John Conyers (D-Mich.)joinsFed Up campaigndemonstrators speaking out

against raising interest rates outsideof the Federal Reserve in Washington, Sept. 17, 2015.
Top Fed officials do not appear to share those worries. Yellen told the House Financial Services
Committee in November that she believed the economy was performing well, making a rate hike in
December a live possibility.That was just days before October jobs numbers showed unusually high
job growth, prompting a series of hints from other Fed decision-makers that a rate hike would be
imminent, barring unforeseen economic changes.
One reason Yellen has said the Fed is willing to raise interest rates before inflation reaches the 2percent target is that the central bank wants to preempt its inflation target. She said she does not
want the central bank to slam on the brakes by raising rates dramatically when inflation does cross a
key threshold.
The movement to lobby the Fed has yet to gain much traction in Congress. Still,Tuesdays briefing
shows activists' success in advancing the Federal Reserve as a key progressive battleground -- an
accomplishment that would have been unthinkable just two years ago.
The Fed Up campaign has, for example, made Fed policy a front in the fight for racial equality.
Several economists and activists noted on Tuesday that people of color stand to lose the most if the
Fed raises rates. African-Americans have an unemployment rate that is typically twice that of whites,
making them especially sensitive to policies that allow unemployment to decline -- or prevent it from
doing so.
William Spriggs, chief economist at the AFL-CIO, prefaced a presentation on the role of
discrimination in black unemployment by asking the audience to consider whether black lives matter
to the Federal Reserve.
But at bottom, briefing participants made clear that the progressive Federal Reserve movement was
born out of circumstances not of their choosing. Setbacks in other areas -- lopsided trade deals, the
decline of unions, the stagnation of the minimum wage and political resistance to fiscal stimulus -have converged to stack the deck against workers, making it all the more essential that the Fed
permit the economy to expand unhindered, they argued.
We are left with an economy that only generates wage growth when the economy is really, really
tight, Bivens said.
Also on HuffPost:
10 Best Economies In the World
10. United Kingdom
> 2014 GDP: $2.55 trillion
> Life expectancy: 81.0 years
> Govt debt as % of GDP: 89.5%
> Patent applications per 1 million people: 89.9
The United Kingdom is one of largest economies in the world and is a leader in many measures of
innovation and efficiency. Home to Oxford University, University College of London, Cambridge, and
other major institutions, the U.K. has the second best research universities in the world, second only
to Switzerland. The U.K has potential to bring in outside investors, with the fourth best investor
protection of any country. It also had the fourth best capacity to attract talented workers.
Maintaining strong institutions and quality infrastructure often requires a great deal of investment,
and like many other competitive nations, the UK has the means to borrow large sums of money. The
countrys debt was equal to nearly 90% of its GDP, one of the highest general government debt levels
worldwide.
Read more at 24/7 Wall St.
Nick-K (Nikos Koutoulas)/Flickr
10. United Kingdom

The United Kingdom is one of largest economies in the world and is a leader in many measures of
innovation and efficiency. Home to Oxford University, University College of London, Cambridge, and
other major institutions, the U.K. has the second best research universities in the world, second only
to Switzerland. The U.K has potential to bring in outside investors, with the fourth best investor
protection of any country. It also had the fourth best capacity to attract talented workers.
Maintaining strong institutions and quality infrastructure often requires a great deal of investment,
and like many other competitive nations, the UK has the means to borrow large sums of money. The
countrys debt was equal to nearly 90% of its GDP, one of the highest general government debt levels
worldwide.
Nick-K (Nikos Koutoulas)/Flickr
image
9. Sweden
> 2014 GDP: $448.25 billion
Sweden ranks as the ninth most competitive economy in the world. Being technologically advanced
is important to a nations competitiveness, and the Scandinavian nation is one of the most advanced
in the world. For example, 92.5% of the countrys residents use the Internet, seventh-most in the
world. The nations citizens and corporations were among the most likely to harness new
technologies to improve efficiency. The country for availability of the newest technologies as well.
Sweden is also one of the most innovative nations in the world. The country files an average of 312.5
patents per million residents, the third-most in the world.
szeke/Flickr
image
8. Finland
> 2014 GDP: $221.04 billion

Finland slid from fourth to eighth place in the GCI this year, partially due to declining economic
conditions. Last year, Finlands economy contracted for the third year in a row, largely due to a
decrease in exports, particularly technology and paper. Despite the decline in trade, Finland remains
one of the worlds most competitive nations with a strong foundation for sustainable long term
growth. Finlands institutions, for example, are the most transparent and protective in the world, and
is superlative for its property rights, lack of organized crime, and ethical business practices. A
prominent education system also accounts for Finland being one the most competitive world
economies. Finland has provided the highest quality primary education in the world. In addition,
Finnish students routinely perform among the best in the world on international standardized tests
such as the Programme for International Student Assessment (PISA).
Wojtek Gurak/Flickr
image
7. Hong Kong SAR
> 2014 GDP: $397.51 billion
> Patent applications per 1 million people: n/a
While Hong Kong is a territory of China, it is able to operate as a semi-independent nation. In fact,
the territory is one of the most prosperous financial capitals in the world, and serves as a portal to
international commerce and a hub of technological development. The nations current leader, CY
Leung, is called the chief executive. So it is not surprising that Hong Kong rates as highly favorable
to business. Hong Kong has one of the most favorable financial markets in the world, trailing only
New Zealand in market efficiency. Hong Kong also has the best infrastructure in the world. For
example, its transportation system was rated among the best for ease of access and physical
condition. It also has the best electricity and telephone networks in the world. No country has a
higher rate of mobile telephone subscriptions, for example.

Sprengben [why not get a friend]/Flickr
image
6. Japan
Japan is home to one of the healthiest workforces in the world. Life expectancy for Japans 127.1
million residents exceeds 83 years, higher than in any of the other 10 most competitive nations.
After Switzerland, Japan ranks second globally in corporate spending on research and development.
Japanese businesses are not the only entities investing in development. Most competitive nations
have accumulated significant debt investing in public institutions and infrastructure. Partially due to
the nations recent policy of government stimulus spending and quantitative easing to spur inflation,
no country has accumulated more debt than Japan relative to its GDP. Japans debt is equivalent to
246.4% of its $4.75 trillion GDP. Heavy corporate and government investment may have bolstered
national innovation. Japan applies for more patents per capita than any other nation, with an
average of 334.9 patent applications per 1 million residents. While Japan is a global leader by many
measures, the Pacific island nation lags behind 82 other nations in female workforce participation.
Moyan_Brenn/Flickr
image
5. Netherlands
> 2014 GDP: $798.59 billion

The Netherlands moved up from being the eighth most competitive nation last year to rank as the
fifth most competitive nation in the world this year. Though the countrys GDP is still below 2008
levels, the competitiveness of the Dutch economy was bolstered by strong performance and
improvements in education and infrastructure each ranking as the third best in the world. The
Netherlands, which borders the North Sea, has the highest score in quality port infrastructure in the
world. Like all of the most competitive countries, the Netherlands is far from perfect. According to
the WEF, in the most business friendly countries, wage levels are more often determined by
individual companies. In the Netherlands, however, wages are often set by a centralized bargaining
process, which can limit the flexibility of corporations in determining wages of their workers. The
Netherlands ranks especially poorly for flexibility in wage determination, and restrictive labor
regulations present the biggest obstacle for doing business in the Netherlands and is said to have
hindered progress.
Abdel Charaf Photography/Flickr
image
4. Germany
Germany is the fourth most competitive country in the world. Though the countrys score remained
unchanged from the previous year, Germany climbed up one spot on the WEFs annual report. Like
most competitive countries, Germany borrows large sums of money to invest in institutions and
infrastructure. Though the current levels of debt mark a reduction from the previous year,
government debt in the country stands at 73% of GDP. Business is Germanys greatest asset. The
country ranks third in the world for its sophisticated business practices, and for using the latest
technologies in production processes. As in many of the most competitive nations, government
presented the biggest hindrance to German competitiveness. When asked to name the biggest
impediments to doing business, Germans were most likely to cite inefficient government
bureaucracy and complex tax regulations.
Werner Kunz/Flickr
image
3. United States
The United States, one of 38 innovation-driven economies worldwide, remains in third place this
year. The United States has the second largest market size of any country, just behind China. The
U.S. labor market is also among the most flexible in the world, which means it can withstand wage
fluctuations and workers can easily move from one economic activity to another. The United States
also performs well in measures of innovation and business sophistication. American industries have
the second best collaboration with universities in the world. While the American university system is
part of one of the most innovative higher education institutions, the country trails other developed
nations in other measures of education. The U.S. primary school system, which encompasses
kindergarten through middle school, is rated worse than 28 other nations.
aurlien./Flickr
image
2. Singapore
> 2014 GDP: $452.69 billion
The Republic of Singapore is a small city state off the southern coast of Malaysia, separated from
Indonesia to the south by the Singapore Strait. Just 255 square miles in area and home to just 5.3
million people, the very densely populated Singapore also has one of the most advanced economies
in the world. Singapore trails only one other country in competitiveness for the fifth consecutive
year. The countrys higher education and training system an essential component of a healthy labor
market and competitiveness more generally overtook Finland this year as the best in the world.
When asked to identify the most problematic factors for doing business in Singapore, country
residents identify restrictive labor regulation as the greatest obstacle.
DaveR1988/Flickr
image
1. Switzerland
> 2014 GDP: $472.83 billion
For the seventh consecutive year, Switzerland was rated the worlds most competitive economy.
Switzerland like Singapore and the United States that round up the top three performs very well in
most competitiveness measures. The countrys infrastructure is rated better than that of any other
country. As in Northern Europe and the United States, however, the quality of Switzerlands
infrastructure declined over the past year. The country leads the world in several other measures as
well, particularly innovation, which is assessed based on the presence of major research institutions
and patent applications, among other factors. Switzerland trails only Britain and the United States in
the average rating of top tier universities, and there are 320.8 patent applications per 1 million
Swiss residents, far higher than in the vast majority of countries.
kevinq2000/Flickr
image
http://www.huffingtonpost.com/entry/progressives-federal-reserve-interest_565e46b9e4b08e945fed5
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The Fed Is About To Put The Brakes On The Economy

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The Fed Is About To Put The Brakes On The Economy

economy.Josh Bivens, the Economic Policy Institute

ASSOCIATED PRESSRep. John Conyers (D-Mich.)joinsFed Up campaigndemonstrators speaking out

> 2014 GDP: $2.55 trillion

> Life expectancy: 80.8 years

Read more at 24/7 Wall St.

> Govt debt as % of GDP: 68.3%

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