Progressives need to step up their opposition to any moves by the Federal Reserve to increase interest rates in the near future, economist Dean Baker of the Center for Economic and Policy Research told a group of progressive leaders convened by the Campaign for America's Future.
That message comes amid a grassroots effort this week designed to line up organizations behind a call on the Fed to not increase interest rates before the economy reaches full employment.
There is a widespread expectation that the Fed will raise interest rates sometime in 2015, ostensibly to keep the economy from "overheating" and driving up the rate of inflation. The problem is, as Baker pointed out in his presentation, there is no inflation threat on the horizon, but there is a very real threat of choking the economic recovery and driving up unemployment if interest rates rise.
"This is a huge, huge issue and it is largely ignored by much of the progressive movement, largely because people don't understand it," Baker said. "And I would say to a large extent that's how they" – the bankers and the corporate class that has the ear of the Federal Reserve's members – "want it."
Baker has been working closely with the Center for Popular Democracy's "Fed Up" campaign, which has been pushing the Fed to focus on moving the economy toward full employment as a top priority.
The campaign has emphasized that after more than five years of supposed economic "recovery," labor participation rates remain at historic lows, wages are only now beginning to increase slowly, and unemployment rates among African Americans and in a number of low-income communities remain well into double digits.
Citing the push in Congress to get the Keystone XL pipeline built, which some estimates say would produce about 36,000 jobs during its construction, Baker said, "if the Fed raises interest rates we're talking about kicking millions of people out of jobs." If instead the Fed worked to get the unemployment rate down to about 4 percent, "that's about 4.5 million people ... that's more than 100 XL pipelines."
The Fed Up Campaign is seeking organizations willing to sign a petition calling on the Federal Reserve to not increase interest rates while there are segments of the economy with high unemployment and stagnant wages. "Raising interest rates in 2015 would be a catastrophic mistake. The American economy needs to see significantly more wage growth, not less," the petition says.