Federal Reserve Board & Unemployment: FRB Approach to Unemployment Is Too Academic, Indirect and Unjust; Direct, Immediate Action Is Needed

It may be time to remove unemployment from the jurisdiction of the Federal Reserve (Fed); the institution is not well suited to handle unemployment applicable to demonstrable programs but rather academic theories and insular debate. Narrow, esoteric research is relied upon as the sole justification in making policy decisions in an area as vital as unemployment; it does not seem to be the right approach.

The Fed only performs theoretical and high-level monetary policy and banking supervision, making the agency unable to deal with an issue like unemployment in a concrete fashion. Perhaps another agency–for example, the Labor Department–would be much better suited to this role. It would be far more helpful to perform research simultaneously with the initiation with direct programs to help correct unemployment in order to get people back to work and earning money to sustain themselves and their families.

In general, economists cite each other’s work, leaving their research vulnerable to being refuted and dismissed when noneconomist arguments are presented against it. Also, tremendous assumptions are made in these academic works with no presentation of reasons for such assumptions, except the writer’s own thoughts, which may contain unexamined and unacknowledged biases. An example of this point is contained in a paper authored by Alan Krueger, Judd Cramer, and David Cho (KCC) titled “Are the Long-Term Unemployed on the Margins of the Labor Market?”

For example, on pages 40-41 of the KCC paper, the authors conclusion of “It appears that re-employment does not fully reset the clock for the long-term unemployed,” is based on the observation of one chart of data from one survey. Because of the huge ramifications of such a conclusion, more explanation of it is absolutely necessary or a qualification that the observation is solely based on their observation from one survey, period. The survey questions asking the long-term unemployed about their situation are leading; the paper just reports the option most selected. (See page 43 of the KCC paper.)

The paper’s authors also state a curious juxtaposition (carryover paragraph on page 54 of the KCC paper).

A stronger macroeconomy helps the long-term unemployed in part because it raises demand in their previous sectors. But even in good times, the long-term unemployed are often on the margins of the labor market, with diminished employment prospects and relatively high labor force withdrawal rates.

Well, if there were a stronger macroeconomy, most of the unemployed would be working. The paper is convoluting two themes: the long-term unemployed frozen from the job market due to stubbornness and those long-term unemployed persons who are frozen out of the job market because the jobs in their sector disappeared. Yet, the result for both situations would show as the same in the survey used in this paper.

If the Fed is to continue with unemployment, there must be immediate activity (not just more academic research) to generate programs to directly assist with getting people back to work. The current state of affairs is an injustice to taxpayers in need of real assistance.

[Note: I think the critique of the Federal Reserve (Fed) and its responsibility is valid; simply viewing the issue as academic alone does not produce real-world programs to address the problems. However, it seems that the new Chair of the Fed, Janet Yellen, seems to recognize this critique and is attempting to address it (although the Fed's action at best is indirect--to make moves to try to coax the financial markets to act on the economy. This indirectness is problematic at a time where the market signals an economic recovery and the public still sees recessionary effects. It is time for direct action; action that seems to be beyond the ability of the Fed to produce).]

U.S. Civil Service: Partnership for Public Service and Booz Allen Hamilton Propose Unfair, Inequitable Dick Grote Style “Rank and Yank” System for the Civil Service, despite Its Many Flaws

The second merit system principle (5 U.S.C. sec. 2301(b)) reads as follows and must guide any successful civil service reform proposal:

All employees and applicants for employment should receive fair and equitable treatment in all aspects of personnel management without regard to political affiliation, race, color, religion, national origin, sex, marital status, age, or handicapping condition, and with proper regard for their privacy and constitutional rights.

The website, Government Executive, published an article about a proposal from the Partnership for Public Service (PPS) and the federal contractor Booz Allen Hamilton (BAH) to reform the federal civil service in the United States. (See report at http://cdn.govexec.com/media/gbc/docs/pdfs_edit/040114e1.pdf.) In short, PPS and BAH propose an inhumane and cruel solution, rank and yank, (contrary to the second merit system principle)– wrapped up in a colorful PDF document and poor, vague writing–that must be rejected totally.

I continue to be amazed that a system that caused organizational failure (Enron) or organizational disarray and destruction of innovation in a high-tech company (Microsoft) continues to be seen as a positive cure-all solution. Any proposal that seeks to enrich few people at the cost of the many is an insult to the democratic form of government that governs the country; how ironic that such an undemocratic proposal is fashioned for the United States government’s civil service.

Among the various proposals was a stunning one–a rank and yank system. (Emphasis, below, mine.)

Problem seen by PPS & BAH: Rigid policies that were designed to encourage long-term tenure and internal equity, for example, are now a burden on a government that needs to encourage flexibility and innovation to meet rapidly changing and difficult challenges. (Page 8, second column, second full paragraph of PPS & BAH report.)

Their solution–a rank-and-yank style system: With a credible performance management system in place, our proposed system would eliminate tenure-based pay increases for managers and employees, and instead make pay progression within a particular salary band based strictly on performance—up to an occupation’s market rate for performance that meets expectations, and above that rate only for performance that exceeds expectations. Employees who fail to meet their performance expectations would not be eligible for a base pay increase until their performance improves to satisfactory levels. (Page 25, second column, second full paragraph of the PPS & BAH report.)

PPS and BAH rank-and-yank style system slightly differs from the full system proposed by Dick Grote in that it recommends no salary increase rather than direct firing. But curiously, with all of the vague and convoluted verbiage of the report, PPS and BAH do not say how this proposal will be paid for.

Given the reality of fixed salary budgets in government and a comment by Robert Tobias, consulted on the report, stating that the proposal will likely be budget neutral, I infer that the small amount of so-called top performers will be enriched at the impoverishment of the large remainder of the workforce (some of them suffering everlasting stagnant pay). This blatant inequity and unfairness, itself in violation of the merit principles the PPS & BAH report notes that it values (page 9), is likely the reason for the confusing writing in this part of the report. Given a flat salary pool, those designated as so-called poor performers would likely never get another increase while witnessing their paycheck’s economic power withering away as a result of inflation and an increasing cost of living.

Rank and yank, pay for performance, up or out, whatever it is called really works one way: Giving the managers the absolute power to sort the workforce (in secret), giving the employee little to no ability to participate or appeal the management decision. Twenty percent will be designated as the richly rewarded “top performers,” 70% will be designated as “vital” and yet receive little salary increase, and then 10% will be designated as poor performers, with no salary increase at all until they decide to quit or suffer with working hard for a salary that cannot keep up with their cost of living.

This cruel proposal must be subject to discussion of all consequences, with complete involvement of the public, in clear language and then rejected.

Group of 7 (8?) Industrialized Countries: Cover for Western (U.S.) Power; the Russian Federation’s Indifference to Exclusion and Ukraine’s Financial Status

Country Date of Membership Gross Domestic Product (2012, US$) Public Debt (2014) Nuclear Weapons UN Security Council Veto
United States 1975- 16,244,600,000,000 13,356,802,459,016 Y Y
Japan 1975- 5,959,718,262,199 12,366,765,846,995 N
Germany 1975- 3,428,130,624,839 2,794,118,579,235 N
France 1975- 2,612,878,387,760 2,410,642,622,951 Y Y
United Kingdom 1975- 2,471,783,570,300 2,483,846,721,311 Y Y
Russia 1998-2014(?) 2,014,774,938,342 197,418,852,459 Y Y
Italy 1975- 2,014,669,579,720 2,414,687,978,142 N
Canada 1976- 1,821,424,139,311 1,619,280,601,093 N
Ukraine 176,308,825,694 67,216,393,443 N N

Source: Country, date of membership, http://www.g8.utoronto.ca; gross domestic product, http://data.worldbank.org/indicator/NY.GDP.MKTP.CD;
public debt, http://www.economist.com/content/global_debt_clock; nuclear weapons, http://www.armscontrol.org/factsheets/Nuclearweaponswhohaswhat;
UN Security Council, http://www.un.org/en/sc/members.


Futility of “Colorblindness”: The Struggle Continues


Most disturbing is the persistence, breadth, and depth of White hegemony in the United States of America. Recent interaction with Russia concerning Ukraine has sometimes elicited comments that the society of the United States is diverse and free. These claims always provokes a deep concern because the United States has its own issues with race that it has never resolved (all proclamations to the world otherwise notwithstanding).

Hence, it is good to have more articles further explaining where the United States has been, where it is now, and what is to be its future.

U.S. Judiciary: Chief Justice John Roberts Issues 2013 Year-End Report

John Roberts, Chief Justice of the United States, issued a 2013 year-end report on the judiciary.

The Chief Justice focused on the budget in this year’s report. The Chief Justice stated that the sequester has caused staff reductions and other cuts. Further adherence to a hard freeze at the sequester level could continue the necessity of staff reductions and other cuts within the judicial branch. The Chief Justice noted that the judiciary’s total budget is 0.2 of 1% of total federal outlays (the number of the outlay mas not specified in the Chief Justice’s report).


Pay in 2010-2013 (in dollars)

Pay in 2014 (in dollars)

Chief Justice of the United States



Associate Justices of the Supreme Court



Circuit Judges



District Judges



Judges of the Court of International Trade




In the appendix to the report, the Chief Justice provides and explanation of the workload of the judiciary. I will focus on the Supreme Court’s workload. Five per curiam decisions were issued during this term in cases that were not argued.


















In forma pauperis









Paid docket




























signed opinions










U.S. Congress: GOP Stewardship of Their Legislative Responsibilities Disappointing; Must Cease Blaming and Punishing the 99%

Yet again the GOP is playing games to force votes that, if successful, would continue to cut programs and services to the 99% under the guise of performing their duties: exercising the power of the purse under the U.S. Constitution–extending the debt limit (which should not exist these days because cash coming into the Treasury from FICA and FERS are immediately taken and their respective accounts are issued Treasury securities that will be redeemed with cash in the future). The so-called debt limit should be automatically raised now and not used as a dubious bargaining chip to pass unacceptable GOP proposals in any form. (Passing a form of an unacceptable plan, that is, incrementalism, must also be rejected.)

The Congress must accomplish its mission responsibly. I cannot expect the process to be perfect, but I can expect that these legislative responsibilities are carried out fairly and equitably for all those who reside within the United States of America. The vulnerable and suffering are our fellow human beings; help is what is needed not condemnation or punishment. The Affordable Care Act is the law and must be implemented on time.

Because the GOP only wishes to work for the 1% only, no further negotiations, appeasements, or discussions can be had with that party until and unless they are prepared to do the work on behalf of all of the people of the United States. The debt limit should be passed as a separate bill; appropriations bills should be passed for the entire fiscal year, not embarrassing fits and starts.