The president of the AFL-CIO today joined a chorus of congressional Democrats who prefer Janet Yellen over Lawrence Summers to succeed outgoing Fed Chairman Ben Bernanke when he steps down.
Richard Trumka, the labor chief, contends that Yellen – the current Fed vice chair – would bring a more “balanced approach” to managing the nation’s monetary policy that would give equal weight to combating unemployment and keeping a lid on inflation.
Without officially endorsing her, Trumka told reporters at a Thursday breakfast sponsored by the Christian Science Monitor that “if you look at history, Yellen has been very balanced in her approach, not just last week but forever . . . and that’s a better approach than Larry’s.”
'CORROSIVE TO THE COUNTRY'
Trumka is dissatisfied with the relative silence on monetary policy by the usually outspoken Summers, the Harvard economist and former Treasury secretary who has also advised the Obama administration. The union chief expressed frustration with Summers’ past emphasis on price stability over employment.
“I think if he continues to say we’re only going to deal with inflation, then we would not support that – because that has been corrosive to the country and bad for the economy,” Trumka said during a wide-ranging discussion of union concerns just days before Labor Day.
CNBC, citing an administration source, reported recently that Summers will likely be named chairman of the Fed in a few weeks, though he is “still being vetted.” He is viewed as the preferred candidate due to his close ties to the president as well as other senior administration officials.
Yet about a third of the Senate’s 53 Democrats signed a letter urging Obama to appoint Yellen, a former University of California Berkeley economist and one-time president of the Federal Reserve Bank of San Francisco, to the job.
Lawmakers such as House Minority Leader Nancy Pelosi (D-CA) have offered support in what seems to be evolving into a political test of wills within the party. And some influential figures in finance, including former Fed governor Alan Blinder and former Federal Deposit Insurance Corp. Chairwoman Sheila Bair, have also given a boost to Yellen’s candidacy.
EMPLOYMENT AND INFLATION
Much of the Democratic and labor critique of Summers is that he’d give short shrift to the Fed’s mandate to promote full employment at a time when some in the business community and housing industry are growing nervous about inflation and rising interest rates. Yet some analysts say there’s little difference between Summers and Yellen on the dual Fed concerns of inflation and unemployment.
“We find it is very hard to delineate between the top two candidates’ views on monetary policy, financial stability and the current regulatory framework,” concluded a recent research note from Wells Fargo economists.
Yellen’s views on employment and inflation are well noted, the bank economists said, citing an April 4 speech in which she said she believes “progress on reducing unemployment should take center stage for the FOMC, even if maintaining that progress might result in inflation slightly and temporarily exceeding two percent.”
Larry Summers, for his part, also believes employment should be a priority, according to the Wells Fargo analysis. The economists cited an article by Summers in the Financial Times on Feb. 10, in which he said economic growth and job creation “should become the focus of our national economic conversation.”
Of course, it’s far from clear how much weight Trumka’s comments on Fed leadership issues have with the White House and congressional leaders. Labor unions have been in steady decline for decades, whittling away Trumka’s clout within Democratic circles. The AFL-CIO remains a presence in American politics but its strength has faded in terms of giving Democrats a solid voting base.
More than 20 percent of all workers belonged to a union in 1983, a figure that plunged to 11.3 percent last year, according to the Bureau of Labor Statistics. That number will continue to decline as baby boomers age into retirement. More than 14 percent of workers over 45 belong to unions – compared to just 9.5 percent of 25-to-34 year-olds.
“We will be involved [in the Fed competition] whenever the proper time is,” Trumka said today. “There’s nothing to fight right now. He [Summers] hasn’t been named and nominated. And he may come out and say, ‘I am fully in favor of enforcing full employment as well as inflation.’ If he’s sincere about that … that’s a whole different story.”
The Fiscal Times’ Josh Boak contributed to this report.