by Ady Barkan
But imagine that they are able to scrounge up the extra $345 in monthly payments, so they decide to take out the mortgage even at the higher interest rate. There are still significant consequences for them and the local economy: as a result of the higher interest rate, they have $345 less in disposable income—every month. Maybe that means they no longer go out to the movies or a restaurant for date night; maybe that means they don’t buy a new car for a few more years. Whatever the specifics, the higher interest rates likely mean approximately $4,200 less in consumer spending every year—which means $4,200 less in profits and wages for the businesses that they otherwise would have patronized.
And that only represents the impact of interest rates on mortgages and new home construction. If the couple has student debt, credit card debt, or car loans, then they will be paying more interest on those every month, leaving them with even less disposable income.
This emblematic story explains the power and importance of the Federal Reserve’s monetary policy decisions. The impact of a 1 or 2 percent change in the Federal Reserve’s interest rate reverberates throughout the American economy, which features 1 million to 2 million new homes being built every year; $1.45 trillion in student debt owed by 44 million borrowers; over $1.2 trillion in car loan debt; and about $750 billion in credit card debt owed by about 175 million credit card holders. And that’s not to mention the importance of low interest rates for small businesses to borrow and invest in new workers and capital.
So where’s the rub? Why doesn’t the Fed always keep interest rates low and promote genuine full employment? Why, for example, did the Fed raise interest rates from 2015 to 2018?
The answer from Fed officials and conservative economists is that it needs to slow down the economy in order to keep inflation low. If unemployment gets too low and workers are able to bargain for significantly higher wages, this line of thinking goes, firms will need to raise their prices significantly; workers will then demand higher wages to offset their higher cost of living, and a dangerous upward price-wage spiral will wreak havoc on the economy.
The most conservative members of the Federal Reserve—like Kansas City Fed president Esther George—were making this argument loudly beginning in 2011. (Indeed, various Fed officials were publicly fretting about inflation in 2007 and the beginning of 2008, just as the entire U.S. economy was collapsing.)
But worrying about excess inflation in America’s current economy is a bit like the fire chief refusing to put out a blaze because he’s worried about flooding. For the past decade, inflation in the United States has been consistently under 2 percent—the rather arbitrary and very low target that the Fed set under former chairman Ben Bernanke. Meanwhile, despite its being the longest “recovery” in history, wages have barely grown at all. That is to say, employment rates and wages have been lower than the Fed’s goals, and inflation has also been too low; the economy, in short, has been too weak. And all of this has happened against the backdrop of decades of stagnant wages for most workers.
So what motivates Fed officials to keep the economy weaker than it could be? First, the Federal Reserve is alone among major U.S. policy-making institutions in that it is not fully public. Its governance structure is convoluted and esoteric—intentionally designed to ensure that the Fed is accountable to the interests of America’s major financial institutions rather than those of the broad American public. Second, most Fed officials received their training and came of age in the 1970s and 1980s. Their formative economic experience was the high inflation of the ’70s and the “heroic” decision by Fed chair Paul Volcker to tame that inflation by jacking up interest rates and creating a major recession in the United States, throwing millions of people out of work. Which is to say, they’re still fighting very old battles instead of grappling seriously with the new world that we’re in. And third, Federal Reserve leaders are a wealthy and largely white group of people who work and socialize with other white and wealthy people and are legally accountable primarily to an even whiter and wealthier group of people. And so their perspective on the economy is very different from that of the average American.
And yet, in the beginning in 2012, with Congress controlled by a Republican Party that had long ago stopped listening to reason or caring about the welfare of the broad American public, it seemed to me that the Federal Reserve represented the most powerful economic policy-making body that might actually be impacted by reason and advocacy.
At that initial meeting in D.C., Shawn’s presentation was a huge hit. As the meeting closed, I called the question: Should we launch this campaign? The Federal Reserve was holding its annual conference in Jackson Hole, Wyoming, in three short weeks. We could crash the exclusive confab and make a splash, but we had to make the decision immediately. Organizers from St. Louis, Washington, D.C., Kansas City, and Minneapolis all gave an enthusiastic thumbs-up. Why not give it a shot? they asked. What have we got to lose?
But I had an embarrassing personal dilemma. All year long, Rachael and I had been looking forward to a week of backpacking in Glacier National Park, and we had scheduled it for the week before the Jackson Hole event. I couldn’t go on vacation and prepare our team of protesters at the same time.
Shawn came to the rescue. Over the coming two weeks, he prepped eight brave adventurers, teaching them all about the Fed; booked flights and hotels; and printed the signs and bright green T-shirts—featuring the slogan “What Recovery?” on the front, and graph showing wage stagnation on the back—that would become our campaign’s signature. Our friends at the Economic Policy Institute connected us with Ylan Mui, a Fed reporter, who previewed our trip by profiling Ce-Ce Butler, a McDonald’s worker who was part of our special-ops crew.
When we landed at the remote Jackson airport for that first trip to the annual meeting, the article had already drawn attention. Esther George, the president of the Federal Reserve Bank of Kansas City, who was hosting the meeting, had reached out to Ce-Ce and invited her to meet that very day.
Only a few hours before she was scheduled to open her biggest event of the year, George sat down with all ten of us, listening as we each explained why we were there. Every other member of our group told her about their family’s economic struggles and why they needed her to pursue stronger economic growth. My family was upper-middle-class, so I chose to highlight how I felt her fears of inflation were overblown and why I thought she needed to focus her energy on job creation. At the end of the meeting, we snapped a photo and shared it on Twitter.
A couple of hours later, as the Fed officials and their interlocutors began filing into the conference space for the opening dinner, my nine comrades and I formed a receiving line twenty feet away from the door. “What recovery?” read our most prominent sign. “Want to understand labor market dynamics?” read another. “Ask a worker.” Federal Reserve chair Janet Yellen, with her shock of white hair and diminutive frame, smiled in surprise as she walked by us. I ran to catch her before she went inside. As I placed my hand on her shoulder and thanked her for her advocacy on behalf of working families, the news photographers snapped away furiously. The photo of the two of us was splashed across the front page of the New York Times business section the next morning and the talking heads on cable news wondered out loud whether security had been too lax in letting me get so close to her. We gave interviews to all the assembled reporters, who were intrigued by the novelty of protesters at the Fed’s meeting. One of our contingent, Reginald Rounds, was ecstatic when we listened to the long interview that he had given to the BBC. His voice carried particular force because he had traveled from his hometown of Ferguson, Missouri, which had just been engulfed by an uprising against police brutality and racial economic oppression.
As the news articles piled up, all featuring our central message that the economy wasn’t strong enough for communities of color and working families, my boss Andrew texted me from New York: “The press coverage is insane!” My theory was being proven right: with so little colorful narrative at th
e Fed meeting and so many reporters who cared about it, we could get our message heard loud and clear with even a minimum amount of political theater. And on Friday evening, as our trip wound down, we got another piece of good news: Michelle Smith, Janet Yellen’s right-hand woman, emailed me to say that Yellen would be happy to host a meeting back in Washington, D.C., since she hadn’t had time for a sit-down in Wyoming. We were off to the races.
Four years earlier, when we moved from New Haven to Queens, Rachael had spent the summer in China on a language fellowship. I had done all the packing and driven our belongings into New York, enjoying the novel challenge of steering a midsize U-Haul over the Triborough Bridge, through the midday traffic, and around Astoria’s myriad potholes. This time it was her turn. When I got back from Jackson Hole, our entire apartment was in boxes. And in what we felt was the ultimate sign of our newfound class status, UCSB had agreed to pay for our moving costs. I was more than happy to let a trio of burly men carry everything down the two flights of stairs and into an enormous orange truck.
We sat on the carpet in the empty apartment, filled with anticipation for our new life out west. Rachael’s five years of hard work in graduate school had paid off handsomely with a dream job, and my two years of scheming and proselytizing about the Fed had been vindicated. We traveled to the Upper West Side to say goodbye and spend the night with my father and stepmom. For our final dinner, we decided to go back to the taqueria on Amsterdam Avenue where I had taken Rachael for our first date. It had been twelve years since we arrived in New York City for our first year at Columbia. All of a sudden we were entering our thirties and moving to California.
The next week, camped out at my mother’s house in Pasadena while we waited for our furniture and looked for an apartment in Santa Barbara, I had a follow-up phone call with Alexander, the funder who had given us the $100,000 seed grant. He was excited about the results of our trip to Jackson Hole, and particularly amused that so much of the press coverage had mentioned our bright green T-shirts. Of course, I told him, it’s all about the T-shirts. He asked me to send him a budget for 2015.
Twenty-five of us gathered in Washington, D.C., in mid-November for our meeting with Janet Yellen and the other governors. We identified three people to share personal stories about life in a weak economy, and another six people to present each of our demands to the Fed. Twenty-four hours before the meeting with us, we blasted out a press release announcing the formation of the Fed Up Coalition, which would be bringing the voices of everyday Americans into the Federal Reserve. We scheduled a press conference on the steps of the Fed for the next day, just before we would go inside the headquarters.
That night, while prepping in my hotel room, I got a phone call from Michelle Smith, Yellen’s consigliere. She was not happy. She had set up the meeting thinking it would be an anodyne listening session. We were using it to launch a public campaign aimed directly at her boss. Her colleagues inside the building were urging her to call off the meeting, she told me. I asked her not to do that. The working-class folks who had taken time away from their families and jobs to travel across the country wouldn’t be very happy if Yellen canceled the meeting at the last minute, I said, hinting at the prospect of embarrassing publicity in that unfortunate event. Michelle decided to keep the meeting but punished us by canceling the planned group photo with Yellen that they had previously agreed to.
All of the major newspapers sent reporters to our press conference the next day. We told our stories and previewed our policy demands, which included a call that the Fed use a transparent process for filling the open presidencies at its Philadelphia and Dallas banks, and that it not repeat its usual formula by selecting a white male corporate executive. After we were done pontificating, we scarfed down some empanadas before filing into the Fed’s enormous white-marbled headquarters. We were escorted into the ornate conference room where the Fed’s policy makers meet every six weeks to set interest rates. Three dozen Fed staffers sat in the audience and around the back wall, while most of our contingent took seats around the central table. At the appointed hour, Janet Yellen walked in with three of her deputies—Vice Chair Stanley Fischer and Governors Lael Brainard and Jerome Powell. Over the next hour we ran through our game plan, telling stories and laying out policy demands. When Kendra Brooks of Philadelphia recounted how she had lost her job and then her home, I thought I saw Janet Yellen’s eyes tear up. Fischer thanked us for laying out our demands so clearly, Brainard and Powell each reiterated our argument that the economy was still not strong enough, and Yellen thanked us for our time and our perspective—without committing to do any of the things we asked. As the meeting ended, Anthony Newby, the executive director of the Center for Popular Democracy’s organizational partner in Minneapolis, turned to me and said, “That was an amazing piece of organizing, brother.”
The successful meeting with the Fed dispelled the nagging doubts about our ability to interest working-class people and community-based organizations in this work. And the glowing press coverage that we received for launching the campaign made it clear that we could immediately impact the national debate about Fed policy. When Alexander called to tell me that he would give us a $750,000 grant for the following year, we had everything we needed to run a proper campaign.
I flew home to Santa Barbara, logged into CPD’s employee portal, and requested three weeks of vacation in December. It had been an intense year, and I was ready for a long break to clear my mind. Rachael and I had been renting a cute bungalow by the ocean, but we were eager to take advantage of America’s absurd mortgage interest tax deduction laws and buy a place of our own. After two months of diligent searching, we put an offer down on a beautiful, cozy three-bedroom Depression-era cottage on the city’s Westside, five hours after it came on the market. Although someone else had outbid us by $10,000, the owner was taken by the charming letter that Rachael had written to accompany our bid, and escrow closed a few days before Christmas. (Rachael’s dissertation was on the role that letters played in the rise of eighteenth-century literary genres, and her expertise certainly was paying off.) My father, stepmom, and brother flew in for the holiday from New York; Rachael’s mother, sister, and sister’s boyfriend arrived from Rhode Island; and my mother and stepfather drove up from Pasadena. We had a Christmas feast in the rented bungalow, and on December 26 we cleaned it out and moved our belongings into our new home. On New Year’s Eve we stayed up playing cards and getting drunk on champagne and cider. Our future was bright and getting brighter.
Over the next eighteen months, the Fed Up campaign continued to shape the national discussion about Federal Reserve policy by rinsing and repeating our formula. Shawn and I traveled to the Federal Reserve cities around the country, where we held popular education sessions with our partner organizations and their members. Using the money from Alexander, we provided them with grants that would pay for an organizer’s time. They built small local coalitions of allied organizations, often including labor unions and community organizations. Those coalitions requested meetings with the local Federal Reserve presidents, where we would repeat the approach we had taken with Janet Yellen in D.C. William Dudley, president of the Federal Reserve Bank of New York, initially refused to meet with us, so we called Pedro da Costa at the Wall Street Journal and told him that we would be protesting outside Dudley’s offices. His story ran the morning of our protest; in the middle of it, our lead organizer got a phone call from Dudley’s deputy offering to schedule the meeting and apologizing for any miscommunication.
The following August (2015), knowing that a repeat of our small protest would not generate the same surprise and attention at Jackson Hole, we brought one hundred workers and organizers to the Fed’s symposium and announced our intention to hold our own counter-conference. The Nobel Prize–winning economist Joseph Stiglitz supplied our event with the star power it needed, Obama adviser Jason Furman dropped by to tell us he thought we were doing important work, and even Lael Brainard, the Fed governor, sat q
uietly in the back of the room during one of our sessions. The press coverage was even better than in year one.
But were we actually making any difference? It was hard to know. The Federal Reserve had not raised interest rates once since the beginning of our campaign, but no one could say whether our pressure had affected its decisions. Only a few weeks after our initial Jackson Hole protest, the Fed had created the Community Advisory Council—with the explicit aim of focusing on issues that mattered to working-class families—and had appointed some good people to it. But we didn’t know whether that council had any influence, either.
By the spring of 2016, however, it was at least clear that we had significantly shifted the political discourse about the Fed. Using some of the new money from the big grant, I had hired a young policy wonk named Jordan Haedtler to lead our advocacy in Washington, D.C. Jordan was soft-spoken, hardworking, and charmingly nerdy: he sang in barbershop quartet competitions on the weekends and spent his vacations visiting presidential libraries. He quickly got to work building relationships with the staff of the Democratic members of the House Financial Services Committee and the Senate Banking Committee, which had jurisdiction over the Fed. Janet Yellen was required by law to testify twice a year in front of each committee, which presented us with valuable, predictable opportunities to advocate for full employment and more diverse and representative governance. In advance of each hearing, Jordan worked with our economist allies to draft recommended questions, with accompanying background information. He then gave the questions to the Democratic staffers and organized our community partners to call their members of Congress and urge them to highlight our priorities during the hearings. (They were often happy to oblige; it wasn’t as though they had other constituents calling on them to ask different questions during these gripping affairs.) Simultaneously, Jordan and Shawn (and eventually Rubén Lucio and Victoria Ruiz, a punk rocker activist from California) organized delegations of working-class folks to attend the hearings in person. This meant travel and very early mornings to get in line for a coveted seat in the small hearing room, but our work paid off handsomely: at each hearing, Yellen was peppered with a dozen questions from progressive Democrats, many of whom publicly thanked our activists for showing up in bright green T-shirts and noticeably changing the ambiance in the room. This was a stark change from previous years, in which the hearings had been dominated by Republicans excoriating Yellen and her predecessor for doing too much to promote job creation and not enough to prevent inflation.