Essay on Don't Blame the Fed for Widening Inequality

In an article title, Do not blame the Fed for Income inequality, Blame Congress that was published on the website of the Cable News Network, Matt Egan makes a compelling case of why the yawning inequality the United States should not be credited to the Federal Reserve Bank but instead on Congress. The article is a response to the criticism of the Federal Reserve Banks response to0 the recession which involved releasing more money into the economy and making many rich Americans even richer. Matt Egan argues that this would not have been necessary had Congress been more decisive and firm. The article blames the lawmakers for legislating very timid stimulus packages to lift the nation from recession. The article contends that fiscal policy, which is under the purview of Congress is a much more powerful tool in supporting economic recovery than monetary policy, which the Federal Reserve Bank is in charge of. The article defends the Federal Reserve Bank by arguing that though what they did was not the best for the economy, it was the best they could do. It further condemns Congress for being in the best position to do what needed to be done, but not doing enough of it.

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I strongly agree with Matt Egan that Congress was best placed to remedy the inequality in the economy and redeem the economy from the recession. I also agree that fiscal policy is a much better tool for correcting a recession rather than a monetary policy which leaves the recovering economy at the risk of increased inflation. I agree with the articles conclusion that the Federal Reserve Bank is not responsible for the inequality in the economy but rather that a skewed fiscal policy, which is the responsibility of Congress is. It is indeed true as the article asserts, that if fiscal policy makers, such as Congress, took more of the accountability for promoting Economic recovery and job creation, monetary policy would be less aggressive and thus the inequality gap would not widen further.

On the discussion board where several of the articles read were discussed and critiqued, a variety of perspectives and opinions emerge as to what is the real cause of income inequality, the extent of inequality and the possible remedies for the situation, I will analyze three of the response from the discussion group here below.

Edith Garcia in her response is critical of the capitalist mentality and sees it as the root of the income inequality. She considers the situation of industrial and manual workers who are increasingly made to be more productive while their remuneration remains constant. She believes that it is situations like this that breed inequality as the employer enjoys more production from the manual worker while minting their pay.

Maria Agjeli is concerned about the shrinking middle class as the richest of the population grew richer, and the middle class slowly regressed to poverty. In her response, she cites data that shows that the top twenty percent in America own 84% of the total wealth. She sees this figure grossly unfair as the economy is ideally supposed to operate on the principle of equity and equality.

Kathy Szelag is also critical of the current distribution of wealth in the country. While recognizing that in such an unequal population the riches of the rich will be made up by the squalor of the poor, she cites data that shows the bottom 40 percent of the population own a paltry. 0.3% of the total wealth between themselves. She also decries the shrinkage of the middle class as the richest kept getting richer. She describes the situation as shocking.

Works Cited

Egan, Matt. "Don't Blame the Fed for Widening Inequality. Blame Congress". CNNMoney, 2017, http://money.cnn.com/2015/06/02/news/economy/income-inequality-federal-reserve/.