CPD IN THE NEWS

New Republic - Last weekend, Cee Cee Butler, a 34-year-old McDonald’s worker from Washington D.C., became sick with the flu, or at least something that resembled the flu. Her phone had been cut off and she missed work Friday, Saturday and Sunday. “I did a ‘no-call, no-show’ for three days and I’ve never done that in over the year and a half I’ve been working here at McDonald's,” she said. “They terminated me Tuesday morning. So I lost my job, my rent is going up in December, I have two kids—19 and 5, a girl and boy—and I can’t afford to take care of them.”

On Friday, Butler gathered outside the Federal Reserve building with around two dozen activists from labor unions and progressive groups before an afternoon meeting with Fed Chair Janet Yellen. The groups are part of a new campaign called “Fed Up” that is pressuring Yellen and her colleagues to keep interest rates at zero until the recovery strengthens and wages rise. “The economy is not working for the vast majority of people,” said Ady Barkan, a lawyer from The Center for Popular Democracy, which is the lead organizer of the campaign. Fed Up wants to rectify that problem by putting direct pressure on the Federal Reserve itself—a quest that may not captivate the public’s attention but could have a very real effect on the lives of working Americans.

In August, for instance, members of Fed Up staged protests outside of the Federal Reserve’s annual monetary policy conference in Jackson Hole, Wyoming. Many reporters there said it was the first time they could remember protestors at the conference—but their tactics must have worked, because Yellen agreed to meet with the protesters Friday afternoon in the boardroom where the Federal Open Markets Committee (FOMC) meets eight times a year to set monetary policy. Three other Federal Reserve governors—Vice Chair Stanley Fischer, Jerome Powell and Lael Brainard—joined the meeting and the activists said that Yellen was engaged throughout and was moved by the stories she heard. They hope that this meeting was just the first of many in the future.

The message the Fed Up campaign delivered is the same one voters sent loud and clear last week: The recovery is not being felt by millions of Americans. Exit polls indicated that 45 percent of voters considered the economy the most important issue of the midterms. Wage growth for low-income workers, like janitors and fast food workers, are barely keeping up with inflation. “That’s not an economic recovery,” said Jean Andre, who does location support for film production and is a member of New York Communities for Change. “That’s not the way thing should be.”

But the slow recovery isn’t always noticeable in leading economic indicators. The unemployment rate, for instance, has fallen 2.1 percentage points since the start of 2013 and is now at 5.8 percent, its lowest point in more than six years. As a result, some economists inside and outside the Fed, including inflation hawk Charles Plosser, have called for a hike in interest rates in the near future. “Beginning to raise rates sooner rather than later reduces the chance that inflation will accelerate and, in so doing, require policy to become fairly aggressive with perhaps unsettling consequences,” Plosser, the president of the Federal Reserve Bank of Philadelphia, said Wednesday.

Plosser’s worry about rising inflation, even though it is nowhere to be found, could prove dangerous. If the FOMC listens to the hawks, it will prematurely raise rates and choke off the recovery before workers see wage growth. So far, Yellen has done a good job ignoring Plosser and Co. And, luckily, Plosser and Richard Fisher, the president of the Dallas Federal Reserve Bank and another hawk at the FOMC, announced that they would retire in the spring of 2015, opening up two positions that have a significant impact on monetary policy. Fed Up sees their retirements as a boon—and is keen to have a say in the selection process.

Under the current rules, Plosser and Fisher’s replacements will be chosen by the board of the Philadelphia and Dallas reserve banks, respectively. Each board has nine members, three from banks and six from nonbanks—companies and organizations that are not financial institutions. Because of Dodd-Frank restrictions, only the six non-bank members are involved in selecting the replacements. But of those six members, three are chosen by banks and three are chosen by the Fed board in Washington. Workers and consumers are supposed to be represented on the board, but of the 108 members, 91 are from financial institutions and corporations. Just two are leaders of labor groups and another 15 represent non-profit organizations.

Fed Up has a list of demands to make the replacement process more transparent and to ensure the public has adequate representation within the central bank. They want a public schedule of the process, a list of criteria for how the replacements will be chosen, a chance for members to question the candidates, and public forums where citizens can discuss monetary policy with candidates and the search committee. These reforms, they hope, will keep presidents like Plosser and Fisher—who activists say are disconnected from the daily struggles of their constituents—out of office. “We need a president in Philadelphia who will listen to working people,” said Kati Slipp, the director of Pennsylvania Working Families. “Charles Plosser hasn’t been or he would not believe that our economy has really recovered.” In fact, Fed Up is already getting results. On Friday morning, the Philadelphia Fed announced that it was setting up an email to receive inquiries about the search process. “That would never have happened if this campaign hadn’t happened,” Slipp said. The campaign said it expected the same things from the Dallas Fed.

After Republicans destroyed Democrats in the midterms, many liberal commentators argued that a fresh agenda for raising wages could help the Democratic Party win back voters, particularly those in the white working class. But the problem isn’t that Democrats’ ideas—raising the minimum wage, investing in infrastructure and strengthening the safety net—won’t help middle- and lower-class Americans. It’s that the weak recovery has destroyed those ideas’ political salience. It’s a political problem much more than a policy one.

Such arguments almost always ignore monetary policy. After all, no one but Ron Paul fanatics care about the Federal Reserve. And the Fed is independent from the federal government. If a Democratic candidate’s economic message was to fill the FOMC with economists committed to keeping interest rates low or even adopting a different monetary policy regime altogether, voters would likely roll their eyes. It would be a political disaster. But given congressional gridlock, it might also be far more effective at boosting the recovery.

The Fed Up campaign isn’t going to change that. Millions of Americans will not suddenly realize that the most important economic actor in the United States is not the president or Congress but the Federal Reserve. They will not understand that some inflation is needed, especially right now, to convince businesses to invest and consumers to spend money to get the economy back going again. But the campaign may convince some Americans of the Fed’s importance. That’s why Cee Cee Butler, the former McDonald's worker who was fired Tuesday, and Jean Andre, the man who scouts out locations for films, spent a cold Friday morning outside the Fed.

“I just got out of the shelter two years ago and here I am about to be back in one. I’m not trying to go back there,” Butler said. “My daughter will never walk in my shoes. She doesn’t need to. That’s why my voice needs to be heard.”

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During the presidential primary, Democratic National Committee Chair Debbie Wasserman Schultz has managed the impressive feat of angering virtually every liberal in America. Bernie Sanders supporters think she displays a transparent biasfor Hillary Clinton. Party stalwarts, including Clinton fans, criticize the decision tohide primary debates on weekend nights, ceding hours of free media time to Republicans in the formative stages of the election. And in a recent interview with the New York Times Magazine, Wasserman Schultz insulted millennial women for being “complacent” about abortion rights. This is an incomplete list.

In two separate petitions, more than 94,000 people have demanded that Wasserman Schultz resign as DNC chair. But back in her district, in Hollywood, Florida, Timothy Canova has another idea: vote her out of office.

Last Thursday, Canova, a former aide to the late Sen. Paul Tsongas and a professor at Nova Southeastern University’s Shepard Broad College of Law, jumped into the Democratic primary in Florida’s 23rd congressional district. It’s Wasserman Schultz’s first primary challenge ever, and with frustration running high against her, it’s almost certain to draw national attention. But Canova first became interested in challenging Wasserman Schultz not because of her actions as DNC chair, but because of her record.

“This is the most liberal county in all of Florida,” Canova said in an interview, referring to Broward County, where most of Wasserman Schultz’s district resides (a small portion is in northern Miami-Dade County). But she more closely associates with her significant support from corporate donors, Canova argued. He listed several of Wasserman Schultz’s votes, such as blocking the SEC and IRS from disclosing corporate political spending (which was part of last month’s omnibus spending bill),opposing a medical marijuana ballot measure that got 58 percent of the vote in Florida, preventing the Consumer Financial Protection Bureau from regulating discrimination in auto lending and opposing their rules cracking down on payday lending, and supporting “fast track” authority for trade deals like the Trans-Pacific Partnership.

“I think anyone who voted for fast track should be primaried. I believe that ordinary citizens have to step up,” Canova said. 

Canova espouses many of the populist themes that attract the left: fighting corporate power, defending organized labor, and reducing income inequality. But this is not just a Bernie Sanders Democrat. You have to go back further. Tim Canova is a Marriner Eccles Democrat.

Eccles chaired the Federal Reserve during Franklin Roosevelt’s presidency. And Canova believes the central bank should revisit Eccles’s unorthodox strategies to jump-start a broad-based economic recovery. “In the 1930s, the regional Fed banks made loans directly to the people,” Canova said. “Instead of purchasing $4 trillion in Treasuries and mortgage-backed securities, [the Fed] could buy short-term municipal bonds and drive the yield to zero for state and local governments. They could push money into infrastructure, making loans to state infrastructure banks.” Canova has even suggested that the government create currency outside of the central bank, breaking their monopoly on the money supply, as President Abraham Lincoln did with the “Greenback” in the 1860s.

During World War II, FDR directed Eccles’s Fed to finance American war debt at low rates, eventually producing a stimulus that helped to end the Great Depression. It was a time when the Fed was far more accountable to democratically elected institutions, one that Canova looks back upon fondly. “People like to talk about the Fed’s independence, that’s really a cover for the Fed’s capture,” he said. “They look out for elite groups in society, and the hell with everybody else.” 

A growing faction of progressives are beginning to return to their roots, asking whether Fed policies truly support the public interest. The Fed Up campaign, with which Canova has consulted, seeks to pressure the Fed to adopt pro-worker policies. A surprise movement in Congress just cut a 100 year-old subsidy the Fed handed out to banks by $7 billion. Even mainstream figures like economist Larry Summerswonder whether the Fed’s hybrid public/private structure, which critics believe makes it beholden to financial interests, makes sense. 

Progressive debates on central banking are not as advanced here as in Europe, where British Labour Party leader Jeremy Corbyn wants a “quantitative easing for people,” where the central bank injects money directly into the economy rather than filtering it through financial institutions. But Canova, who says his views were most influenced by an undergraduate economics professor who taught with one book—John Maynard Keynes’s General Theory of Employment, Interest and Money—bridges this gap. Twenty years ago this week, he wrote an op-ed for the New York Timesopposing the reappointment of Alan Greenspan as Fed chair because of his support for high real interest rates. If elected this fall, he would instantly become the strongest advocate in Congress for a people’s Fed.

While Debbie Wasserman Schultz has few known views on the Federal Reserve, Canova’s populism offers a strong counterweight to her corporate-tinged philosophy. And even before that contrast plays out, the hunger for any challenge to Wasserman Schultz is palpable. 

“The money is coming in more rapidly than believable,” said Howie Klein, co-founder of Blue America PAC, which raises money for progressive Democrats. Wasserman Schultz has been on Klein’s radar since she, as chair of the “Red to Blue” campaign for electing House Democrats, refused to campaign against three Republicans in Florida because of prior friendships and their joint support for the state sugar industry.

Klein sent a Blue America fundraising email shortly after Canova’s announcement, and raised $7,000 within 12 hours, and over $10,000 at last count. The intensity of support reached beyond the PAC’s traditional donor base. “Our average donation is $45, but in this case we’re getting $3, $5,” Klein said. “For people who our donors have never heard of, it can take three-four months to do that. It’s just because ofDebbie Wasserman Schultz.” 

Similarly, Canova says he’s seeing tens of thousands of visits to his website andFacebook page, suggesting support beyond south Florida. However, he wants to localize rather than nationalize the race. The district, initially drawn with Wasserman Schultz’s input when she served in the Florida state Senate, is now more Hispanic and less reliable for a politician who Canova believes has lost touch with her constituents.

“You talk to people at the Broward County Democratic clubs, they say she takes us for granted,” Canova said. The political model for his campaign is David Brat, another academic who took on a party leader—then-House Majority Leader Eric Cantor—and defeated him, on the grounds that Cantor ignored his district amid constant corporate fundraising.

If there’s one thing Wasserman Schultz can do, it’s raise money—that’s why she chairs the party. She will have a big cash advantage and the power of incumbency. But Canova thinks he can outmatch her by riding the populist tide. “There’s a tendency to get so down about the system, but this is an interesting moment we’re living in,” Canova said. “This is a grassroots movement. We’re tapping in without even trying yet.”

Source: The New Republic

State Pennsylvania Auditor General Eugene DePasquale got an earful during a daylong meeting in Philadelphia on Friday on ways to improve the accountability and effectiveness of charter schools.

Paul Kihn, deputy superintendent of the Philadelphia School District, warned that if Harrisburg passed pending legislation that would permit the unlimited growth of charters, the cost to the district would be so devastating that it might not be able to manage its own schools.

Lawrence Jones Jr., head of Richard Allen Preparatory Charter School in Southwest Philadelphia, said the state needs to provide equitable funding for both district and charter schools.

"This grand experiment is one that is about to collapse under its own weight, because we are doing such a poor job in oversight," said Donna Cooper, executive director of Public Citizens for Children and Youth.

Kyle Serrette, education director for the Washington-based Center for Popular Democracy, said his organization was stunned by the number of federal fraud cases involving charter officials that have occurred in Pennsylvania in recent years.

His group, which works with community groups and unions, called for "a comprehensive investigation that allows the public, regulators, and legislators to better understand the depth of the problem" to improve oversight.

And Philadelphia City Controller Alan Butkovitz told the auditor general that his office is taking another look at the district's charter school office and a group of city charter schools.

The review, which he expects to be completed in a few months, is a follow-up to a study his office completed in 2010 which found that the charter office "was not doing its job" overseeing the schools and that questionable practices were rampant at 13 charters it reviewed.

It was the fifth and final meeting that DePasquale has held across the state to gather input on improving the state's 174 taxpayer-funded charters, which enroll 120,000 students.

Philadelphia is home to 86 charters with 67,000 students.

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Bloomberg News - August 22, 2014, by Jeff Kearns, Simon Kennedy and Michael McKee - Divisions within the Federal Reserve over how long to keep easy monetary policy are already in evidence in Wyoming as investors prepare for Chair Janet Yellen’s keynote speech.

Fed Bank of St. Louis President James Bullard told Bloomberg Radio that the U.S. central bank may begin tightening monetary policy earlier than officials previously expected.

“The evidence is leading toward an earlier increase than would have been in the works earlier this year,” said Bullard. “Labor markets have improved quite a bit relative to what the committee was thinking.”

Bullard spoke after Kansas City Fed President Esther George told Bloomberg Television that broad-based employment gains suggest the U.S. economy is strong enough to withstand higher interest rates. Philadelphia Fed President Charles Plosser, who voted against the Fed’s policy statement last month, told CNBC he’s concerned about the Fed not adjusting policy appropriately.

By contrast, Atlanta Fed President Dennis Lockhart urged more patience, warning in a separate interview with Bloomberg Radio against “moving prematurely and snuffing out some progress.”

* * *

Robots don’t steal jobs, the U.S. labor market is less flexible than it was and workers haven’t suffered unprecedented periods out of work.

Photographer: Bradly Boner/Bloomberg

Fed Chair Janet Yellen arrived at the dinner to be greeted by about 10 people wearing bright green T-shirts emblazoned with “What Recovery?” and carrying placards with labor market data. Close

Those are among the conclusions of papers being presented at the symposium. Here is a review of their contents, which can be read in full on the Kansas City Fed’s website.

Robots and computers don’t steal as many jobs as some believe, and automation actually benefits many workers, Massachusetts Institute of Technology Professor David Autor said in his paper.

A key reason humans aren’t obsolete yet is that simple tasks such as visually identifying a chair, which any child can do, aren’t so easy for engineers to teach to computers, Autor said.

“Journalists and expert commentators overstate the extent of machine substitution for human labor and ignore the strong complementarities that increase productivity, raise earnings, and augment demand for skilled labor,” he wrote. “Challenges to substituting machines for workers in tasks requiring flexibility, judgment, and common sense remain immense.”

* * *

The U.S. labor market became less fluid in recent decades partly because of an aging workforce, a shift to older businesses, and the spread of occupational licensing and certification, economists Steven J. Davis and John Haltiwanger wrote in their paper.

The economists define labor market fluidity as “flows of jobs and workers across employers.” The paper found the U.S. “underwent a large, broad-based decline in the pace of labor market flows in recent decades.”

“An aging workforce is a factor behind the slowdown of worker reallocation,” the paper said.

* * *

U.S. workers in the aftermath of the 2007-2009 recession haven’t experienced unprecedentedly long bouts of non-employment, according to a paper by economists Jae Song and Till von Wachter.

Their findings “suggest that the potential for hysteresis in the aftermath of the Great Recession is moderate,” the paper said. Hysteresis posits that people out of work for too long have a harder time finding work, leading to a persistent decline in the employment-to-population rate

* * *

Policy makers would benefit from a better understanding of labor markets, economist Giuseppe Bertola argued in a paper that weighed the impact of rules making those markets rigid or flexible.

Rules that protect workers from job losses and provide more generous unemployment benefits can soften and smooth shocks to the economy, said Bertola.

* * *

George opened the symposium late yesterday by putting the presenters on the spot.

The last conference devoted to labor markets was 20 years ago, George told the group of almost 200 as they ate steak and salmon dinners beneath elk antler chandeliers.

The presenters and discussants back then included five future Nobel Prize winners and two academics who would go on to be central bankers: Bank of England Deputy Governor Charles Bean and Stanley Fischer, the Bank of Israel governor who became Fed vice chairman in June. Fischer sat at one of the front tables last night.

“So for those of you that will be on the program,” George said to laughter, “We’re either setting you up for a blessing or a curse.”

This year’s topic is “Re-Inventing Labor Market Dynamics.” In 1994 it was “Reducing Unemployment: Current Issues and Policy Options.”

George said she went through the 1994 proceedings only to find central bankers and economists are still grappling with some of the same basic issues today.

“I saw that the discussion included things like the decline in demand for low-skilled workers due to technology and the challenge of the long-term unemployment,” George said. “And questions were raised by that symposium, as they are today, about the usefulness of the unemployment rate as a measure of economic slack.”

It reads like a list of the most vexing issues the Fed faces now and will be attempting to tackle today and tomorrow.

* * *

Fed Chair Janet Yellen arrived at the dinner to be greeted by about 10 people wearing bright green T-shirts emblazoned with “What Recovery?” and carrying placards with labor market data.

The protesters had traveled to Wyoming to highlight the plight of “struggling workers from around the country” who want the Fed to pursue “full employment that reduces poverty and expands the middle class,” according to the Center for Popular Democracy, a Brooklyn-based organization. The backs of their T-shirts had a graph comparing the performance of wage growth among the top 1 percent and the rest.

Ady Barkan, a staff attorney with the group, spoke briefly with Yellen at the door of the lodge’s Explorers Room. “She said she understands the issues we’re talking about and is doing everything they can,” he said, after she had entered the room.

Yellen has regularly cited weak labor markets as a scourge of the economy she’s trying to boost with easy monetary policy.

Shemethia Butler, who works part time at a McDonald’s Corp. restaurant in Washington, was one of those to make the trip. The 34-year-old said that while she isn’t up on monetary policy, she wants policy makers to know she fears higher interest rates for her and her community. She said she works 25 to 35 hours a week for $9.50 an hour at a job she’s had for just over a year. Before that she was unemployed for two years.

“There’s no recovery,” Butler said. “The economy is broken because there aren’t enough jobs for people like me.”

* * *

Yellen’s speech will be the main event of the first full day of the conference. She will speak at 8 a.m. Mountain Time today.

Her address will be followed by the presentation of the paper by Davis and Haltiwanger.

Autor will then discuss job polarization before a panel on demographics featuring Karen Eggleston of Stanford University, David Lam of the University of Michigan and Ronald Lee of the University of California, Berkeley.

European Central Bank President Mario Draghi will deliver the keynote luncheon speech.

Tomorrow, Von Wachter and then Bertola will present their papers.

The final panel will provide an overview of labor markets and monetary policy. It will include Bank of England Deputy Governor Ben Broadbent, Bank of Japan Governor Haruhiko Kuroda and Brazilian central bank chief Alexandre Tombini.

* * *

The conference is lacking Wall Street participants for the first time.

An exception is Jacob Frenkel, chairman of JPMorgan Chase International, who is attending in his capacity of chairman of the board of trustees of the Group of 30, a private-sector group of mainly former policy makers which advises central banks and governments. Tim Adams, president of the Institute of International Finance, is also present.

Draghi, Kuroda and Bank of Canada Governor Stephen Poloz provide international central banking firepower.

Among academics in attendance are Alan Blinder of Princeton University, Harvard University’s Kenneth Rogoff and Martin Feldstein, and John Taylor of Stanford University. President Barack Obama’s administration is represented by Jason Furman, chairman of the Council of Economic Advisers and Jeffrey Zients, director of the National Economic Council.

* * *

The backdrop for the symposium and Yellen’s speech was set by the release of the minutes from the Federal Open Market Committee’s July discussions.

Fed officials in July raised the possibility they might raise rates sooner than anticipated, as they neared agreement on an exit strategy. Some participants were “increasingly uncomfortable” with the pledge to keep interest rates low for a “considerable period,” the minutes said.

At the same time, “many participants” still saw “a larger gap between current labor market conditions and those consistent with their assessments of normal levels of labor utilization.”

* * *

* * *

Some recent stories on the U.S. labor market:

* * *

The opening day of Jackson Hole has been associated with stock-market gains in each of the past seven years. The Standard & Poor’s 500 Index rose an average 1.3 percent on each of them from 2007 to 2012, following speeches by then-Chairman Ben S. Bernanke, who skipped last year’s conference.

The biggest climb was the 1.9 percent of 2009, when Bernanke said the economy appeared to be “leveling out.” Gains also followed his signals of 2010 and 2012 that fresh asset-purchases were imminent.

The bar is therefore set high for Yellen who identifies slack labor markets as a reason for easy monetary policy. Economist Ed Yardeni says the “Fairy Godmother of the Bull Market” won’t let us down.

Still, Steven Englander of Citigroup Inc. says that because “dovishness is increasingly anticipated,” Yellen may have to intensify her support for low interest rates if risk-assets such as stocks are to rally anew.

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