Economy needs a Yellen-led Fed


The U.S. Senate on Monday confirmed Janet Yellen as the next leader of the Federal Reserve, succeeding Ben Bernanke, whose term expires Jan. 31.

We reiterate our view that Ms. Yellen is the right person to head the nation’s central bank during this post-recessionary period when the U.S. economy is experiencing less-than-robust growth and when long-term joblessness throughout the land remains at near-record levels.

We acknowledge that our confidence in Ms. Yellen, who acquitted herself admirably during her five-year tenure as president of the Federal Reserve Bank of San Francisco, was not shared by an overwhelming Senate majority. In fact, her 56-26 confirmation in the upper chamber was closer than most for a Fed chairman.

That’s because many Republicans suspect the new Fed chair, the first women ever to hold the position, will be soft on inflation.

They would have preferred that Mr. Bernanke’s successor repudiate certain of the central bank’s monetary policies, particularly its quantitative easing program, which currently entails monthly purchases of $85 billion worth of Treasury bonds and mortgage-backed securities.

But as noted last week by Ryan Young, a fellow in regulatory studies at the libertarian Competitive Enterprise Institute, Ms. Yellen is “more hawkish on inflation than her dovish reputation suggests.”

The confirmation, he posited, was the Fed’s recent announcement that it intends to taper its monthly bond-buying to $75 billion from $85 billion.

That trim of roughly 13 percent almost certainly was driven by Ms. Yellen, who signaled the direction in which she plans to steer the central bank on her watch.

That Ms. Yellen, a Yale-trained economist, a professor emeritus at UC Berkeley’s Haas School of Business, has been unfairly tarred as an inflationist is attributable to her recognition that the Fed has a dual mandate: Not just to keep inflation in check, but also to promote full employment.

In 2013, the Fed met its goal of no more than 2 percent inflation. But the economy was nowhere near full employment, with the Bureau of Labor Statistics reporting last month that 13.2 percent of American workers were unemployed, underemployed or discouraged.

It’s “imperative,” Ms. Yellen told the Senate Banking Committee, that she and her Fed colleagues “do what we can to promote a very strong recovery.”

Indeed, because the economic recovery of the past four and a half years has been anything but very strong, there were 1.3 million fewer nonfarm payroll jobs in November than there were in December 2007, when the year-and-a-half Great Recession officially began.

The Obama administration’s latest prescription for growing the economy and creating jobs is to extend unemployment benefits and to increase the federal minimum wage.

Gene Sperling, the White House director of the National Economic Council, claimed last week that extension of unemployment benefits through the end of 2014 will not only increase the nation’s economic output, but also create 200,000 jobs.

Meanwhile, the White House also claims that raising the minimum wage “will boost wages without jeopardizing jobs,” while “improving turnover and productivity” in the workplace.

We don’t have much faith in the Obama administration’s economic policies. We much more trust Janet Yellen to craft a monetary policy at the Fed that will produce the robust economic growth and strong job creation we have not seen since the good old days of the mid-2000s.

— From the Orange County Register

 

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