Republican lawmakers are balking at President Obama’s choice of Federal Reserve chairman, Janet Yellen, worried she will favor enhanced government intervention in the economy, including flooding the market with more dollars.
A review of her previous work finds she divined a theory that was a precursor to the current progressive campaign for the government to ensure “fair” pay to employees.
Yellen’s confirmation in the Democrat-controlled senate is all but a certainty after she was approved by the Senate Banking Committee 11 days ago.
Sen. Marco Rubio, R-Fla., announced he plans to vote against Yellen, citing fears she will enact policies to the detriment of long-term economic growth.
“While Dr. Yellen is an accomplished individual, I will be voting against her nomination to chair the Fed because of her role as a lead architect in authoring monetary policies that threaten the short and long-term prospects of strong economic growth and job creation,” Rubio said in a statement.
“Altogether, she has championed policies that have diminished people’s purchasing power by weakening the dollar, made long-term savings less attractive by diminishing returns on this important behavior and put the U.S. economy at increased risk of higher inflation and another future boom-bust,” he concluded.
Sen. Rand Paul, R-Ky., wrote in Time magazine the Federal Reserve “needs to be reformed to prevent Yellen, or any other future nominee, from using the enormous power of the Fed to aid and abet the allies of big government.”
Paul warned Yellen is an advocate of printing more money, calling the policy “madness.”
The inflation fears may be warranted in the case of Yellen.
As WND reported, Yellen is widely regarded as a New Keynesian, meaning she favors government or central bank intervention in the economy.
Together with her husband, Nobel Prize-winning economist George Akerlof, Yellen co- authored a theory on “fair wages” that was a precursor to a later progressive campaign for the government to ensure “fair” pay to employees.
Yellen previously served as chairwoman of President Clinton’s White House Council of Economic Advisers and taught economics at the Haas School of Business at the University of California, Berkeley.
During her tenure at the Clinton White House, Yellen was commonly referred to as a leader in the New Keynesian movement, named after 20th century British economist John Maynard Keynes, whose theories influenced the New Deal
In April 1994, the Chicago Sun-Times hailed Clinton’s appointment of Yellen and other like-minded leading economists as the “rebirth of Keynesian economics.”
“[T]he appointment to the Fed of Blinder and Yellen demonstrates a New Keynesian ascendance that isn’t fully recognized,” reported the Sun-Times.
Also in 1994, the Boston Globe reported Yellen as a major mover of the New Keynesian movement, which calls for an increase in money supply or decrease in interest rates, believing such a move will lower unemployment. The movement believes government intervention can lead to more employment than laissez faire, free market policies.
The Boston Globe reported Yellen was among a “whole generation of economists [who] made their reputations during the 1970s devising these New Keynesian doctrines of wages, prices and market failures.”
Yellen’s most prominent theory was called the Fair Wage-Effort Hypothesis and Unemployment.
The theory posited “workers proportionately withdraw effort as their actual wage falls short of their fair wage.”
At the University of Chicago, professors Edward P. Lazear and Kathryn Shaw explained Yellen’s definition of “fair”: “A wage is generally considered as fair if the pay spread is lower than the performance differential.”
In other words, Yellen believes people will work more if they believe their wages are “fair.”
The theory helped lead to progressive policies of economic “fairness,” including the concept of a “living wage,” in which the government determines what is a fair wage.
Obama has previously supported the “living wage” concept, originally a pet project of the controversial Association of Community Organizations for Reform Now, or ACORN.
A WND review of Yellen’s recent speeches and academic papers finds a theme of arguing for lowering interest rates and other government intervention.
“More generally, by lowering interest rates, fiscal consolidation should diminish net capital inflows into the United States, thereby reducing the current account deficit in this country and current account surpluses elsewhere,” she stated in a 2011 speech on global rebalancing.
Yellen wrote: “Still, I expect the recession will end sometime later this year. That would make it the longest and probably deepest downturn since the Great Depression. Growth will come from a variety of sources. One is federal government spending resulting from the stimulus program passed by Congress earlier this year.”
She said the stimulus package “provides tax cuts that leave more cash in consumers’ pockets, as well as direct government spending increases that add to payrolls and boost economic output.”
With additional research by Brenda J. Elliott.