Ending Hunger in America, 2014 Hunger Report Full Report | Page 53

CHAPTER 1
Figure 1.3 As the Unemployment Rate Rises, the Inflation Rate Falls
15.0

(Percent Change from Year Ago) , (Percent)

12.5

10.0

Civilian Unemployment Rate

7.5
5.0

2.5

Inflation (CPI)

0.0
-2.5
1960

1970

1980

1990

2000

2010

2020

Shaded areas indicate U.S. recessions
Source: Federal Reserve Economic Data (2013).

it. Yet the chair and the board of governors are appointed by the president and approved by
the Senate, so members of the Fed are not oblivious to what elected officials think about the
economy. Elected officials—and the public—have to make clear that monetary policy should
put more emphasis on full employment than it has in recent decades.
To its credit, the Federal Reserve has kept interest rates low since the end of the Great
Recession to try to stimulate the economy and encourage lower unemployment. Low interest
rates have had some effect on reducing unemployment, but not enough to turn the economy
around and lead to a surge in hiring. At the time of this writing, the Fed has indicated a willingness to pull back on its use of expansionary monetary policy. But there is no reason to pull
back as long as the unemployment rate remains high and the inflation rate is below 2 percent.
Persistently high unemployment through the recovery shows that monetary policy alone has
limited power to reduce unemployment. It must be matched by more aggressive fiscal policy.

The Deficit Debate and Job Creation
Hyper-partisanship and brinksmanship, especially among Tea Party Republicans, has
turned negotiations about the federal budget into a series of political crises. The uncertainty in
Washington has slowed economic recovery and contributed to the persistence of high unemployment. The negotiations have also resulted in decisions that depressed the recovery—for
example, the reinstatement of the payroll tax in 2012 and the sequester in 2013. See Box 1.2.
The unemployment rate is not expected to fall as low as 5.5 percent until the fourth quarter
of 2018.24 The public sector could make up for the slow pace of job growth, but that means
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