Baum's Views on Money
Good morning, and happy August. Here are some of my daily reads on U.S. economic policy, including some post-mortems on the Fed.
Obama defends one of his own
In case you missed the 59th installment of "Who Will Be the Next Fed Chairman," President Barack Obama defended Larry Summers yesterday to a group of congressional Democrats. For them, the former Treasury secretary will forever be associated with the financial crisis via his support for deregulation during the Clinton administration. Obama threw former Fed Governor Don Kohn's name into the ring, which might give us a break from the Summers v. Yellen media circus. How did Paul Volcker, Alan Greenspan and Ben Bernanke manage to slip quietly into the Fed chairmanship without all the hoopla?
It didn't take long to grab the bait
Don Kohn is a real central banker, in case you didn't know. He headed the Fed's Division of Monetary Affairs under Alan Greenspan, although nowadays one might think twice before putting that on the curriculum vitae.
When in doubt, punt
That's what the Fed did yesterday by removing any reference to "tapering" in its statement, says Mohamed El-Erian, chief executive officer of Pacific Investment Management Co. The Fed has gone from 1) we're going to start to taper before year-end to 2) variable QE to 3) mute on the subject. Given the bond market's reaction to No. 1, some things are better left unsaid.
Good news on the jobs front
Initial jobless claims fell to a 5 1/2-year low of 326,000 last week. Hope springs eternal that Friday's employment report for July will show an increase on the order of 200,000 new jobs. Recent press reports suggest municipalities are beginning to hire again. There's still an unresolved gap between the U.S.'s sub-2 percent growth rate and the stronger pace of hiring.
Repeating "middle class" doesn't help the truly needy
Arthur Brooks, president of the American Enterprise Institute, argues that Obama is focusing on the middle class at the expense of the poor. Where are the policies that will help lift the poor out of poverty, Brooks asks. "If you want to start a landscaping business, all you should need is a lawn mower, not an accountant and a lawyer to help you hack through all the red tape," Brooks writes in a Wall Street Journal op-ed.
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)