Everyone's Ignoring Obama's Most Important Economic Policy Decision

A blog about business and economics.
Jan. 29 2014 7:37 AM

Everyone's Ignoring Obama's Most Important Economic Policy Decision

183727683-president-barack-obama-applauds-janet-yellen-his
Hey guys, remember this?

Photo by Win McNamee/Getty Images

Last night, addressing a joint session of Congress for the annual State of the Union address, President Obama completely ignored the single most important lever he has at his disposal to boost the economy in the short term.

That's too bad, because the speech was delivered under tough circumstances. The White House team clearly felt they needed to deliver an address that signaled awareness of and empathy with the struggles of ordinary Americans in a still-weak economy. They also wanted a constructive speech rather than a partisan stemwinder. But with it obviously inconceivable that Congress would authorize a brand new $350 billion stimulus program—or, indeed, doing anything else ambitious—this left him without much to talk about that would address the short term. They came up with some very creative executive actions, but per the design of the Constitution these will have limited effect. And they mostly talked about moderately scaled ideas that, like most policy ideas, address long-term issues.

Advertisement

What Obama didn't talk about, as usual, is the Federal Reserve which does have the power to act in the short term to boost the economy.

Today will be the last monetary policy statement of the Ben Bernanke era at the Fed. Obama has appointed Janet Yellen to succeed him, and she's been confirmed by the Senate. Obama has also nominated Stanley Fischer to replace Yellen as vice chairman of the Fed. Congress hasn't confirmed him yet. He's also nominated Fed Board of Governors member Sarah Bloom Raskin to a job as deputy secretary of the treasury and he's appointed Lael Brainard, an undersecretary of the treasury, to replace Raskin on the Fed board. Neither of them have been confirmed yet. And then there's a lingering Fed vacancy for which Obama has nominated nobody.

This question of what will Yellen, Fischer, and Brainard do and of who will be the fourth person to join them and what will she do is the dominant public policy driver of the labor market over the next couple of years. And yet nothing was said.

It's not surprising at this point to see the Fed completely neglected in a major political speech or in the post-speech wrangling. But it is disappointing. Is the Fed going to look at the falling unemployment rate and decide it's time for a return to normalcy, or is the Fed going to look at broader measures of economic slack (low inflation, low labor force participation, low wages) and try to drive us to recovery? That's the question that will determine whether the State of the Union a year from now is cheerier in tone.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Doublex

Crying Rape

False rape accusations exist, and they are a serious problem.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

The Music Industry Is Ignoring Some of the Best Black Women Singing R&B

How Will You Carry Around Your Huge New iPhone? Apple Pants!

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

Television

The Other Huxtable Effect

Thirty years ago, The Cosby Show gave us one of TV’s great feminists.

Lifetime Didn’t Find the Steubenville Rape Case Dramatic Enough. So They Added a Little Self-Immolation.

No, New York Times, Shonda Rhimes Is Not an “Angry Black Woman” 

Brow Beat
Sept. 19 2014 1:39 PM Shonda Rhimes Is Not an “Angry Black Woman,” New York Times. Neither Are Her Characters.
Behold
Sept. 19 2014 1:11 PM An Up-Close Look at the U.S.–Mexico Border
  News & Politics
Politics
Sept. 19 2014 6:22 PM Blacks Don’t Have a Corporal Punishment Problem Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 
  Business
Moneybox
Sept. 19 2014 6:35 PM Pabst Blue Ribbon is Being Sold to the Russians, Was So Over Anyway
  Life
Inside Higher Ed
Sept. 19 2014 1:34 PM Empty Seats, Fewer Donors? College football isn’t attracting the audience it used to.
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
  Arts
Brow Beat
Sept. 19 2014 4:48 PM You Should Be Listening to Sbtrkt
  Technology
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Medical Examiner
Sept. 19 2014 5:09 PM Did America Get Fat by Drinking Diet Soda?   A high-profile study points the finger at artificial sweeteners.
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.