Pronounced wealth inequality that has built up for decades poses a major threat to a U.S. economy that is in otherwise “excellent” shape, former Federal Reserve Chair Janet Yellen said Thursday.
The central bank leader from 2014 to 2018 also said the U.S.-China tariff war is having a detrimental impact both on businesses and consumers through higher prices and a general air of uncertainty.
While she doesn’t see a recession on the horizon, she also noted that the risks are piling up.
“I would bet that there would not be a recession in the coming year. But I would have to say that the odds of a recession are higher than normal and at a level that frankly I am not comfortable with,” Yellen said at the World Business Forum.
With three rate cuts this year, there remains “not as much scope as I would like to see for the Fed to be able to respond to that. So there is good reason to worry.”
One particular area she cited was inequality, specifically the extent to which benefits during the longest expansion in U.S. history have flowed mostly to top earners and those with post-high school education levels.
Despite the central bank’s efforts to guide the economy, Yellen cited “a very worrisome long-term [trend] in which you have a very substantial share of the U.S. workforce feeling like they’re not getting ahead. It’s true, they’re not getting ahead.”
“It’s a serious economic problem and social problem because it means the gains of our economic system are not being widely shared,” she added. “It leaves people ultimately with the feeling that the economy is not working for them, a sense of social discontent that is extremely disruptive.”
“If no one had an army, armies would not be needed. But the same can be said of most lobbyists, PR specialists, telemarketers, and corporate lawyers. Also, like literal goons, they have a largely negative impact on society. I think almost anyone would concur that, were all telemarketers to disappear, the world would be a better place.”
― David Graeber, Bullshit Jobs: A Theory