Senators urge Fed chief to tackle shortcomings of steady economy

Senators pressed Federal Reserve Chairman Jerome Powell on Wednesday to consider novel ways to spread the benefits of a record stretch of U.S. growth to Americans and communities still struggling to make ends meet.

Powell appeared before the Senate Banking Committee on Wednesday as the Fed vies to defend a steady economy from a global slump, a lethal virus and a potential recurrence of damaging trade tensions. The Fed chief gave a largely optimistic appraisal of the economy, touting joblessness near 50-year lows, steady household spending, rising wages and solid growth. 

“The current situation of low unemployment, rising wages and high job creation — there’s no reason why it can’t go on,” Powell said. “The single most important thing we can do is take seriously your order to us to achieve maximum employment.”

Even so, senators in both parties urged Powell to consider how the Fed could operate within its legal authority to cure economic issues that have lingered amid more than a decade of consecutive expansion.

“Most families don’t understand why the harder they work, sometimes at more than one job, the harder it’s getting to afford pretty much everything — child care, health care, rent, college tuition,” said Sen. Sherrod Brown (Ohio), the top Democrat on the Banking panel.

“What can you do to make sure that most of our economic growth, not a sliver of it, but most of our economic growth, ends up in workers pockets?” he asked.

Powell responded that while the Fed is exploring ways to ensure the country reaches maximum employment, it does not “have those tools” needed to narrow specific racial, class and demographic differences in economic outcomes.

“Other agencies do, and, of course, elected officials hold the power to address those issues,” Powell said. 

The Fed wields enormous influence over the U.S. economy, but officials say the central bank has a limited selection of tools it can use to shape it. The Fed is legally required to steer monetary policy to reach two specific goals — maximum employment and stable prices — and does so mainly by raising or lowering interest rates.

With unemployment at 3.6 percent and inflation well below the Fed’s target, moving interest rates may do little to boost wages higher or fix fundamental issues with slumping productivity, lower levels of labor force participation and the cost of basic expenses outpacing the rise in wages.

Sen. Catherine Cortez Masto (D-Nev.) said that while she’s “pleased” with the low unemployment rate, she fears for constituents who are “actually working two jobs because the wages are so low, and I think there is a disparity that we have to do a better job of understanding.”

And Sen. John Kennedy (R-La.) echoed that, saying, “We still have too many people in this country who aren’t participating in the great wealth of this country.” 

“I think Sanders supporters and Trump supporters have more in common than they realize: the American dream has become the American game to them, and they think it’s fixed,” said Kennedy, referring to Sen. Bernie Sanders (I-Vt.), a front-runner for the Democratic presidential nomination.

While Powell has taken a unique interest in using the Fed to move unemployment below historic levels, the Fed chief has balked at stretching the bank’s mandate. He has instead urged Congress to pass legislation that could expand labor force participation and productivity to help boost wages across the board and give workers new chances to build prosperous careers. 

“There’s nothing about this economy that is out of kilter or imbalanced,” Powell said. “It’s not really something we can do a lot about other than research and do our jobs on monetary policy.”