John Makin Says Fix the Growth

Change in hourly earnings

This is part of the series highlighting supporters of pro-jobs policies. An updated list of supporters can be found here.

And to be clear, Fix the Growth means Fix the Jobs.

John Makin is a resident scholar and monetary policy expert at the American Enterprise Institute. Having spent time at the Bank of Japan in the 1980s, he probably has some pretty informed views on how overly tight monetary policy can lead to a decade of crushed growth in an aging advanced economy.

And he makes it clear right up front:

“The US Department of Commerce’s third estimate of first-quarter GDP growth, -2.9 percent, does not bode well for US economic growth in 2014… the Fed needs to stop talking about when it will start raising interest rates and instead focus on actions it might take to boost a weak US economy.”

“It is disconcerting that the Fed has so far said virtually nothing about very weak GDP growth numbers or about its implications for possible changes to policy aimed at sustaining growth. After the June 18 Federal Open Market Committee meeting, Fed Chair Janet Yellen instead chose to look ahead to a growth rebound based on stronger growth of consumption and investment, for which there is yet no evidence. So far, the Fed’s only viable policy option has been to talk about further delaying the first interest rate increase that it mandates. Markets have set that date at about mid-2015. It will no doubt slip further to 2016, given the weakness of the US economy.

At the very least, the Fed needs to stop talking about its exit strategy and when it will start raising interest rates and perhaps start talking about things it might do to boost weak growth. That option would include purchasing a wider range of assets than those currently being purchased under the Fed’s quantitative easing program. But before that happens, the Fed will have to stop dreaming about 3 percent growth and wake up to the reality that 2014 will be a slow growth year wherein a resumption of inflation is not a risk. Given the poor forecasting performance by the Fed and most pundits, perhaps we should remember that deflation remains a risk.”

In addition, his comments on wages are dead on point. “Money wages have been rising at a tepid 2 percent pace over the last several years of the ‘recovery.’ With headline inflation at 2.1 percent, real wages are actually falling at a 0.1 percent annual pace.” One more reason that the American public is right: most of America is still functionally in a recession. The scare quotes for the “recovery” our pathetically accurate.

It’s time to do more. Fix the Growth. Take action, together let’s Fix the Jobs.

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