Delaney Urges Yellen to Weigh Income Inequality in Federal Reserve Policies During JEC Hearing

Nov 29, 2017
Press Release

WASHINGTON – During Wednesday’s Joint Economic Committee hearing on the economic outlook with Federal Reserve Chair Janet Yellen, Congressman John K. Delaney (MD-6) urged Chair Yellen to consider growing income inequality and the impacts that potential policy changes could have on the bottom 60% of Americans. During his question period with the Chair, Congressman Delaney spoke extensively about the economic outlook once the data has been disaggregated to account for widening gaps between the top 40% and the bottom 60% since 1980.

“Increasingly, there are two Americas: the America that has benefited from three decades of globalization and automation and the America that has not,” said Congressman Delaney. “The first group has seen their incomes grow, their education and retirement circumstances improve and opportunities for their children expand; while the situation for those left behind by globalization and automation is much more precarious. There is an urgent need to implement policies that encourage both public and private investment in communities that have been hollowed out – infrastructure, broadband, expanded pre-k and community college access and tax incentives for private sector investors.”

Video of the exchange available here, full transcript below:


REP. JOHN K. DELANEY (MD-6): Chair Yellen, thank you for your incomparable service to our country.

CHAIR YELLEN: Thank you.

REP. JOHN K. DELANEY (MD-6): I think many of us will miss you very much.

CHAIR YELLEN: Thank you.

REP. JOHN K. DELANEY (MD-6): You gave a very nice overview of what’s happening in the economy in general, on average, if you will, the macro statistics you opened up your presentation with, which describe a fairly stable to slightly positive picture in many ways. But I wonder, when you think it’s time for us to start thinking a little differently about the data that we look at, because I saw some data recently where they disaggregated what’s happened to two kind of portfolios of the population, the top 40% and the bottom 60%, and they tracked this since 1980. And when you look at that data you see a very different picture. People in the top 40%, their incomes on average are up about 40% since 1980 and the bottom 60% they are flat. The top 40% on average used to be worth six times more than the bottom 60%, and now they are worth 10 times more than the bottom 60%. The top 40% used to spend twice as much on education for their children than the bottom 60%, now they spend four times as much on, education for their children. The retirement savings of the top 40%, on a relative basis, compared to what they’ll need for retirement, have actually improved since 1980, and the story is very bad for people in the bottom 60%. Life expectancies back in 1980 for both of these groups were actually extending, and now for the first time in quite some time we’re actually seeing life expectancies of people in the bottom 60% going down. So, I’m just wondering when do you think we as policymakers, you in your position at the Federal Reserve and us as policymakers here on the Hill have to actually start thinking differently about decisions we make based on the disparities that are starting to grow in our country. I’m not talking top 1% etc., I’m talking about large disaggregation pools, top 40% versus top 60%, because it seems to me that that bottom 60% is also particularly vulnerable to two macro trends that are going on. One, rapid change in the future of work based on automation and innovation. They are much more likely to have their jobs disrupted. Further, they rely much more on important government programs that are likely to come under continued stress. So, when you make decisions about what to do with monetary policy, how much have you started or has the Fed started to disaggregate some of this data and make the decisions differently?

CHAIR YELLEN: Well, you describe in your question a set of very disturbing long term trends that the Fed is very focused on and in fact, some of the information that enables one to document these trends is produced by the Federal Reserve and our surveys of consumer finances and our surveys of household and economic decision making. And of course, there has been over decades a trend toward rising inequality of both income and wealth in the United States that, it’s not recent, it is something that has been going on for many decades.

REP. JOHN K. DELANEY (MD-6): But, does it change, does it cause you to change decisions you would have otherwise made based on what’s happening for the average performance of the economy? Do you see what I mean?

CHAIR YELLEN: Well to the extent that these shifts in income distribution do affect the pace of overall spending in the economy. For example, if high income households spend less of extra income they earn than lower income households, that shift in income distribution can make a difference to overall spending and it is something we would take account of.

REP. JOHN K. DELANEY (MD-6): Right, because I would think hearing your average statistics that the position to actually continue towards a more normal rate environment makes sense, but when you look at this disaggregated statistics you’d be, I would at least be, really scared of how vulnerable this bottom 60% is to any kind of shock in the economy. And I guess, moving on to what we should be doing, I mean, in your judgement when we think about fiscal policy, tax policy decisions, spending policy decisions, how much should we really have a laser like focus on programs, whether they be investing in infrastructure, investing in human capital, creating incentives in the tax code for people to allocate capital to parts of the country that have been left behind economically? How high a priority should that be for us in making our decisions based on the statistics that you are looking at?

CHAIR YELLEN: So for us, unfortunately, we don’t have tools that enable us to target particular groups so our own focus is when we take these trends and study them we really only have a blunt tool that can’t address this but Congress and the administration you have a much wider set of tools and obviously it’s up to you to formulate appropriate priorities.

REP. JOHN K. DELANEY (MD-6): Would you consider it urgent for us to be addressing these trends?

CHAIR YELLEN: Well I am very disturbed and have spoken out for many years about the disturbing trend toward rising inequality and the equity of the tax code is something that I think should importantly be taken into account. And as I said earlier, we are suffering from slow productivity growth and here too I think it’s quite important that in making fiscal policy and other decisions that the focus be on how can that be improved and that does point to investment in people, infrastructure, also private capital, technology, education. So these are squarely I think in Congress’s court and I do think they are urgent to address.

REP. JOHN K. DELANEY (MD-6): Thank you again, Chair.