John B. Taylor house testimony February 11, 2014, Poor economic performance and job growth, Unemployment drop due to labor force dropouts, Failed Fed policies, Committee on Financial Services
“11.4%: What the U.S. unemployment rate would be if labor force participation were back to January 2008 levels.” …James Pethokoukis, American Enterprise Institute, June 2013
“Nearly half of U.S. companies are reluctant to hire full-time employees because of the ACA. One in five firms indicates they are likely to hire fewer employees, and another one in 10 may lay off current employees in response to the law.
Other firms will shift toward part-time workers. More than 40 percent of CFOs say their companies will consider switching some jobs to less than 30 hours per week or targeting part-time workers for future employment.”…Duke University Fuqua School of Business December 11, 2013
“Freedom is the freedom to say that two plus two make four. If that is granted, all else follows.”…George Orwell, “1984″
From The Testimony Before The Committee on Financial Services United States House of Representatives February 11, 2014, John B. Taylor
“Monetary Policy and the State of the Economy”
“The Current Economic Situation
Recently released data indicate that the U.S. economy continues to underperform, with the recovery from the deep 2007-09 recession looking as disappointing as ever. Real GDP growth has been too slow to close the gap between real GDP and its pre-recession trend, even incorporating the temporary pickup near the end of last year.1 Job growth has been too slow to
raise employment relative the population, leaving the employment-to-population ratio below the recession low.2 While the unemployment rate has declined recently, much of the decline is due to an unusually large number of people dropping out of the labor force because of the weak recovery.3 It is good news that the inflation rate has averaged very close to the Fed’s 2 percent
goal during the past decade, but by any measure the performance of the real economy has deteriorated compared to the previous two decades.
I have argued that the main cause of the poor performance is a significant shift in economic policy away from what worked reasonably well in the decades before. Broadly speaking, monetary policy, regulatory policy, and fiscal policy each became more discretionary, more interventionist, and less predictable starting in the years leading up to the financial crisis and have largely remained in that mode.4
There is an obvious empirical correlation between this shift in economic policy and the poor economic performance. But it is more than a correlation: A significant body of economic research predicts that such a shift would result in poorer performance, a prediction that is confirmed by historical experiences from the 1970s to the 1980s and 1990s and by empirical studies of specific policy actions. Moreover, this “policy is the problem” explanation fits the
facts better than alternative views that there has been a secular stagnation due to a persistent decline in the normal real interest rate or that weak recoveries normally follow deep recessions.”
“Though the intention of the majority of those at the Fed in favor of the policies was to stimulate the economy, there is little evidence that the policy has helped economic growth or job growth. Growth has been less with the unconventional policies than the Fed originally forecast. In the year since QE3 gained full steam at the end of 2012, interest rates on long-term Treasuries and mortgage backed securities have risen rather than fallen as was the intent of the policy.
Before quantitative easing, from 2003 to 2008, the average spread between one year and ten year Treasury securities was 1.3%. During the three quantitative easing programs, from 2009 through 2013 the average spread was 2.4%. So it is very hard to establish that QE reduced spreads.”