Janet Yellen Explains Why Our Recovery Has Been So Weak

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


Ezra Klein points to an interesting speech last week from Janet Yellen, vice chair of the Federal Reserve. The question she’s addressing is why our recovery from the 2008 recession has been so anemic, and the answer comes in the form of three “tailwinds.” The first one is both the most important and the one that we have the greatest control over: fiscal stimulus.

History shows that fiscal policy often helps to support an economic recovery….For example, following the severe 1981-82 recession, discretionary fiscal policy contributed an average of about 1 percentage point per year to real GDP growth over the subsequent three years.

However, 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….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.

The full speech is here. Ezra has a nice summary here. The bottom line is simple: we’re doing this to ourselves by actively implementing negative stimulus rather than positive stimulus. I still don’t know whether this is the result of ignorance or deliberate malice—maybe it’s both—but for the past four years we’ve been held hostage by ancient economic ideologies that should have died during the Great Depression. And we’re continuing to pay the price.

A BETTER WAY TO DO THIS?

We have an ambitious $350,000 online fundraising goal this month and we can't afford to come up short. But when a reader recently asked how being a nonprofit makes Mother Jones different from other news organizations, we realized we needed to lay this out better: Because "in absolutely every way" is essentially the answer.

So we tried to explain why your year-end donations are so essential, and we'd like your help refining our pitch about what make Mother Jones valuable and worth reading to you.

We'd also like your support of our journalism with a year-end donation if you can right now—all online gifts will be doubled until we hit our $350,000 goal thanks to an incredibly generous donor's matching gift pledge.

payment methods

A BETTER WAY TO DO THIS?

We have an ambitious $350,000 online fundraising goal this month and we can't afford to come up short. But when a reader recently asked how being a nonprofit makes Mother Jones different from other news organizations, we realized we needed to lay this out better: Because "in absolutely every way" is essentially the answer.

So we tried to explain why your year-end donations are so essential, and we'd like your help refining our pitch about what make Mother Jones valuable and worth reading to you.

We'd also like your support of our journalism with a year-end donation if you can right now—all online gifts will be doubled until we hit our $350,000 goal thanks to an incredibly generous donor's matching gift pledge.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate