Connect with us

Government

Changing the Federal Reserve mandate could provide a down payment to ending racial inequality

Changing the Federal Reserve mandate could provide a down payment to ending racial inequality

Published

4 years ago

on

A Black Lives Matter protester outside the Federal Reserve Bank in New York. Tayfun Coskun/Anadolu Agency via Getty Images

The job of slicing up the economic pie in the U.S. has traditionally fallen to Congress, with the Federal Reserve tasked with making sure there is enough to go around. But this could soon change.

Under proposals put forward by Democrats in Congress, the mandate of the Fed would be tweaked for the first time since 1977, when its objectives were made explicit: promote maximum employment, stable prices and moderate long-term interest rates. Under the new proposals, the central bank would gain an additional task of reducing racial inequality. In short, the central bank could be handed the pie cutter and told to make sure everyone gets a fair share.

If passed, the Federal Reserve Racial and Economic Equity Act would shift some of the responsibility for addressing systemic racial inequality away from Congress. Given that the nation’s politicians have failed to level the playing field to date, that may not be a bad thing.

My work with economist Valerie Wilson finds that the economic position of Black Americans is equivalent to their relative position in 1979, with Black men earning on average 31% less than white men and Black women 19% less than white women. When you factor in the incarcerated population, Black Americans are no better off than they were in 1950.

As a former chief economist at the U.S. Department of Labor who has researched racial inequality, I believe that the proposed changes to the Federal Reserve’s mandate would improve the economic status of Black Americans and that the Fed can achieve this in three key ways.

1. Targeting Black unemployment

The main tool the Fed has in guiding the U.S. economy is through the setting of interest rates. Adjusting its benchmark interest rate changes the cost of borrowing for companies and consumers, which in turn can stimulate or subdue their spending. When the unemployment rate is extremely low – as it was prior to the pandemic – the Fed may increase interest rates. This puts a brake on private consumption and investment and protects against inflation.

The problem is that currently the Fed focuses on the national jobless rate, the same one reported every month in the news. This figure obscures the wide variation among different regions and demographic groups, not to mention it ignores the growing share of Americans who are underemployed.

At present, the Fed uses the national unemployment rate to help guide its rate setting. But even during times of prosperity, the Black American jobless rate is roughly two times the white rate. As a result of the Fed targeting the national unemployment rate – which is roughly equal to the white rate – interest rates are hiked before many Black Americans fully experience the benefits of a deep and lengthy economic boom. My research with former Fed economist Seth Carpenter shows that when the Fed puts its foot on the brakes, the Black jobless rate rises more. Black teen unemployment suffers the most from this brake pumping.

But in line with a change to the mandate to include reducing racial inequality, central bankers could ditch the national rate as its target and instead use the Black unemployment rate. Doing so would still maintain strong economic growth for white Americans but would enable the Fed to set rates in a way tailored to addressing the economic needs of Black people too.

2. Opening up credit

The Fed can also use tools handed to it under the Community Reinvestment Act to narrow racial wealth differences and provide Black Americans with greater access to credit. The act, enacted in 1977, requires the Fed to use its oversight powers to encourage financial institutions to help meet the credit needs of the communities in which they do business, particularly in low- and moderate-income neighborhoods. The new proposals specifically call on the Fed to aggressively implement the act.

This is important because many Black consumers continue to experience discrimination getting loans and mortgages.

[You’re too busy to read everything. We get it. That’s why we’ve got a weekly newsletter. Sign up for good Sunday reading. ]

3. Reporting discrimination

Proposals in the act would ensure that policymakers and the public are made fully aware of racial economic disparities. Under the act’s terms, the Fed would be required to report on recent racial, ethnic, gender and education gaps in income and wealth, with the Fed chair expected to identify racial disparities in the labor market through periodical congressional testimony. The chair would also have to make public how the Fed intends to reduce these gaps.

This is important because the act could be viewed as lessening Congress’ traditional role of using fiscal policy such as taxation and spending to address issues of inequality. Instead, the Fed’s new data collection and analysis responsibilities would put additional pressure on lawmakers to act.

I believe this could have a profound long-term impact on not only individual Black families but the national economy as a whole. The availability of much more data that clearly shows just how wide the racial inequality gap is would put pressure on Congress to find ways to help Black Americans accumulate wealth and the means to secure and affordable housing. This would likely result in lower health care costs, increased housing values and lower crime. This in turn could lead to less spending on social services, with savings redeployed to community enterprises that raise overall productivity.

Likewise highlighting racial discrepancies in employment could force Congress to introduce proposals to bring equitable child care and education to Black communities, as well as better transportation and reliable technology, all of which would raise worker productivity.

No silver bullet

Changing the Fed’s remit is no silver bullet. But at a minimum, the provisions of the proposed act – to make reducing inequality part of the Fed’s mission, to ensure that racial economic disparities are not ignored and to require robust reporting on labor force disparities – could provide a federal response to racial disparities that moves the needle on improving the prosperity of Black Americans. And it comes as America’s reckoning with systemic racism has received fresh urgency and scrutiny following the killing of George Floyd.

Despite this fresh impetus, the act faces an uphill battle. It is unlikely to become law under present political circumstances. And even if the Democrats succeed in winning the Senate and presidency in November, the chances for the act’s success are uncertain. But if over time more Fed governors are appointed that support the proposed mandate, the act’s elements could become policy and practice. This updated mandate would represent a down payment by one of the nation’s most powerful institutions to end systemic racism.

William M. Rodgers III is affiliated with the Biden Campaign. I serve on the economic policy committee.

Read More

Related Topics:

Continue Reading

Government

Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

Published

6 hours ago

on

March 9, 2024

By

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

“When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

“It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

Read More

Continue Reading

Government

Walmart joins Costco in sharing key pricing news

The massive retailers have both shared information that some retailers keep very close to the vest.

Published

8 hours ago

on

March 9, 2024

By

As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters. 

The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.

The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.

Related: Popular mall retailer shuts down abruptly after bankruptcy filing

It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.

You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.

Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.

However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.

Walmart has seen inflation drop in many key areas.

Image source: Joe Raedle/Getty Images

Walmart sees lower prices

McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.

During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.

"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.

He was specific about where the chain has seen prices go down.

"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."

McMillon said that in other areas prices were still up but have been falling.

"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.

Costco sees almost no inflation impact

McMillon avoided the word inflation in his comments. Costco  (COST)  Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.

The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.

"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.

Galanti made clear that inflation (and even deflation) varied by category.

"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.

Read More

Continue Reading

Government

Walmart has really good news for shoppers (and Joe Biden)

The giant retailer joins Costco in making a statement that has political overtones, even if that’s not the intent.

Published

9 hours ago

on

March 9, 2024

By

As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters. 

The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.

The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.

Related: Popular mall retailer shuts down abruptly after bankruptcy filing

It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.

You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.

Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.

However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.

Walmart has seen inflation drop in many key areas.

Image source: Joe Raedle/Getty Images

Walmart sees lower prices

McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.

During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.

"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.

He was specific about where the chain has seen prices go down.

"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."

McMillon said that in other areas prices were still up but have been falling.

"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.

Costco sees almost no inflation impact

McMillon avoided the word inflation in his comments. Costco  (COST)  Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.

The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.

"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.

Galanti made clear that inflation (and even deflation) varied by category.

"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.

Read More

Continue Reading

Trending