Federal Reserve Vice Chair Excoriates Congress For Failing To Boost The Economy

Federal Reserve Vice Chair Janet Yellen

After passage of the 2009 economic stimulus package, which helped save or create millions of jobs, Congress all but gave up providing support to the labor market. Instead, in the last two years, the nation’s deficits have been reduced by $2.5 trillion, with the overwhelming majority coming from spending cuts.

In a speech today, Federal Reserve Vice Chair Janet Yellen took policymakers to task for failing to provide support for the economy, noting that spending cuts have been a “headwind for the recovery“:

Discretionary fiscal policy hasn’t been much of a tailwind during this recovery. In the year following the end of the recession, discretionary fiscal policy at the federal, state, and local levels boosted growth at roughly the same pace as in past recoveries, as exhibit 3 indicates. But instead of contributing to growth thereafter, discretionary fiscal policy this time has actually acted to restrain the recovery.

State and local governments were cutting spending and, in some cases, raising taxes for much of this period to deal with revenue shortfalls. At the federal level, policymakers have reduced purchases of goods and services, allowed stimulus-related spending to decline, and have put in place further policy actions to reduce deficits…While a long-term plan is needed to reduce deficits and slow the growth of federal debt, the tax increases and spending cuts that would have occurred last month, absent action by the Congress and the President, likely would have been a headwind strong enough to blow the United States back into recession. Negotiations continue over the extent of spending cuts now due to take effect beginning in March, and I expect that discretionary fiscal policy will continue to be a headwind for the recovery for some time, instead of the tailwind it has been in the past.

Former President Bill Clinton said much the same thing last week, noting that “everybody that’s tried austerity in a time of no growth has wound up cutting revenues even more than they cut spending because you just get into the downward spiral and drag the country back into recession.” The experience of Europe should be showing U.S. policymakers that cutting spending in a weak economy backfires, squashing economic growth, which causes debt to expand. But it doesn’t seem like that lesson is taking hold.

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Senate Judiciary Chair Declares Defeat In War On Drugs

The Senate’s most senior member lamented the utter failure of the so-called “War on Drugs” and other draconian criminal justice policies Wednesday morning. During an address on the Senate Judiciary Committee’s 2013 agenda, Committee Chairman Patrick Leahy (D-VT) expressed alarm over high rates of imprisonment, harsh mandatory minimum sentences and federal crackdowns of marijuana laws legal under state law. “We have imprisoned people who should not be there and we have wasted money that should be spent on other things,” he said.

There are too many people, too many young people, too many minorities, too many from the inner city who are serving time in jail for people who might have done the same thing but have the money to stay out and are not there. What I say is if you have a youngster in the inner city buying $100 worth of cocaine for example could end up going to prison for years. If you have somebody on Wall Street buying the same 100 dollars from their local dealer, if they’re caught, they’ll be reprimanded and they may even have to do on Park Avenue a week of public service. That’s not right.

Responding to a question on the acclaimed War on Drugs documentary The House I Live In, he added:

[T]he fact that so many people, especially young people, go to prison for a relatively minor thing, a drug offense. And then you ask, why can’t they get jobs afterward? Why do they have problems from then on?

I think we have spent tens of billions, hundreds of billions of dollars on the so-called War on Drugs. Well, we’ve lost.

After laying out Judiciary Committee plans to effectively protect public safety by prioritizing the immediate reauthorization of the Republican-obstructed Violence Against Women Act and holding hearings on gun violence prevention, Leahy focused on those elements of the criminal justice system that send the wrong people to jail – and for too long.

“I say this as a former prosecutor … I think the reliance at the state and federal level on mandatory minimums has been a great mistake,” he said. “I’m not convinced that it has lowered crime, but I know it has imprisoned people who should not be there.”

He also advocated for national standards and oversight of forensics testing, saying, “If you have labs that do not give you right results, and you think you can close a case by sending the wrong person to prison, you’ve done nothing for the safety of people” and “you have tragedy of having an innocent person in prison.”

Responding to a question about federal enforcement of marijuana laws, Leahy reiterated his concern that federal resources are misallocated to marijuana crackdowns while murders and robberies go unsolved. “It was also my feeling as a prosecutor,” he said. “I found more important things to do.” President Obama expressed a similar sentiment recently when he told Barbara Walters the administration has “bigger fish to fry” than target marijuana users, but that has not stopped prosecutors from cracking down on medical marijuana distributors in seeming compliance with state law.

Leahy joins a number of world leaders, including Bill Clinton, who have recently blasted the failed War on Drugs approach. Mandatory minimum sentences, discriminatory crackdowns and criminalization of public health issues are all a part of the tough-on-crime system that has sent more of our own to prison than any other country, under the guise of improved public safety.

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