CPD staff reviewed this page prior to publication.
The Center for Popular Democracy (CPD) is running a campaign (“Fed Up”) that aims to encourage more accommodative monetary policies and greater transparency and public engagement in the governance of the Federal Reserve, and specifically in the selection of regional Federal Reserve Bank presidents and leaders. The Open Philanthropy Project has decided to renew our support for Fed Up with an additional $1 million in funding, plus up to $1 million to match whatever Fed Up raises from other funders this year. This is the third grant we’ve recommended to support CPD’s work on this campaign (see links in the sidebar for more information about our previous grants).
Our default expectation for this grant, as in previous years, is that it is relatively unlikely to have an impact on the Fed’s monetary policy, but that if it does, the benefits would likely be very large. We believe the call for greater transparency and public engagement in the selection of regional Federal Reserve bank leadership is more unambiguously positive and also more likely to succeed, though we do not have much sense of the humanitarian impact of such a change.
The campaign had a strong 2015 in our view (more details below), which increases our estimate of how likely it is that it will have the effects it is aiming for. As ever, we acknowledge that this is an unusually complex policy area, and we could be mistaken in our views.
Update: In October 2016, we supplemented our 501(c)(3) support with a $31,500 grant recommendation to the Center for Popular Democracy Action Fund, a 501(c)(4) affiliated with CPD.
April 2017 update: In total, we ended up recommending $429,000 in matching funding. The “grant amount” above has been updated to reflect this.
CPD is a progressive national advocacy group that works with local community groups across the country to promote its agenda.1
Fed Up is a campaign run by CPD in association with 24 other progressive national advocacy organizations, unions, think tanks, and regional community-based organizations.2 The campaign targets the Federal Reserve, and its stated goals are both substantive (to “create a strong and fair economy”) and procedural (to “create a more transparent and democratic Federal Reserve”).3
More information about CPD and Fed Up is available here and more about our work on macroeconomic policy can be found here.
2. Previous grant
In 2015, we made a grant of $750,000 to the Center for Popular Democracy to support the Fed Up campaign. Fed Up’s total budget for 2015 was approximately $1.1 million.
Overall, the progress made by Fed Up in the past year exceeded our expectations. The campaign attracted substantial media attention and obtained access to some influential policymakers. It is too soon to tell if the campaign will impact monetary policy, but we now believe some basic risks (such as being unable to attract the attention of the Fed at all) have been much reduced. Fed Up Director Ady Barkan’s leadership contributes to our confidence in the campaign.
We do not know if the campaign has had a humanitarian impact, and believe it is likely that we will not have much information on this point until the next recession.
2.1 Fed Up 2015 activities
In 2015, Fed Up4:
- Developed partnerships in all 12 cities with Federal Reserve Banks.
- Met with the majority of the 17 members of the Federal Open Market Committee (FOMC).
- Carried out “day of action” protests at seven of the regional Federal Reserve Banks, associated with the release of its report “Wall Street, Main Street, and Martin Luther King Jr. Boulevard.”5
- Released reports entitled:
- “Mind the Gap”6 about wage targeting and gender inequality.
- “Whose Recovery? A National Convening on Inequality, Race, and the Federal Reserve”,7 which discusses the effects of Fed policies on economic inequality.
- Suggested questions that were asked during Federal Reserve Chair Janet Yellens’ congressional Humphrey-Hawkins testimony about African-American unemployment.
- Brought approximately 100 people to teach-in and protest at the 2015 Jackson Hole Economic Policy Symposium. This included several prominent economists (such as Nobel laureate Joseph Stiglitz, Josh Bivens, Dean Baker, and Brad Delong).
- Protested outside the September FOMC meeting (and was mentioned in a reporter’s question to Chair Janet Yellen during the press conference following the meeting).
- Prompted open letters, protests, and meetings on the lack of transparency and accountability in the regional Fed president selection process (for example, Fed Up representatives pointed out that the new Dallas Fed president had been on the board of the search firm that was hired to select him). This led to the Minneapolis Fed posting a job description for the president role for the first time, a promise of more transparency from the San Francisco Fed 8 and a show of interest from the Dallas Fed.9
- Conducted and released a poll on the public’s monetary policy stance.10
- Prompted former Labor Secretary Robert Reich to make a video about monetary policy.11 The video was released in conjunction with a petition that garnered over 100,000 signatures and was delivered at Jackson Hole.
- Obtained substantial press coverage for these and other activities (below).
2.2 Media coverage
Fed Up was covered relatively extensively in the media over the past year. A collection of examples of Fed Up press coverage from 2015 and 2016 can be found in Fed Up 2015-2016 Press Clippings. Below are some examples of coverage (positive and negative) that the campaign received:
- A story on the front page of the New York Times after Jackson Hole, headlined “Challenged on the Left and the Right, the Fed Faces a Decision on Rates”12.
- A New York Times article13 just before the September decision not to raise interest rates.
- A Politico story14 about the Fed not moving rates at the September meeting, and another one15 from a few weeks before that profiled the campaign with more depth.
- A Washington Post editorial16 from after Jackson Hole criticizing protesters for imperiling the Fed’s independence.
- An article in The Week titled “The Federal Reserve has been politicized. That’s a good thing.”17
- Jared Bernstein’s Washington Post piece18 just proceeding the 2015 Jackson Hole Economic Policy Symposium.
Overall, we are impressed with the press coverage Fed Up has received. The campaign was featured in much of the news about the Jackson Hole Symposium. Since then, Fed Up has continued to be featured in other stories about the Fed, which we believe is a sign of the campaign’s ability to attract ongoing media attention.
2.3 Access to and impact on policymakers
Fed Up was able to interact with influential policymakers more than we expected.
- In January 2015, (following Fed Up’s November 2014 meeting with Yellen), the Fed announced that it was starting a “Community Advisory Council” that would meet with the Fed twice a year, parallel to its pre-existing Federal Advisory Council, which is made up of bank representatives.19 We do not have direct evidence that Fed Up prompted the formation of this panel, but based on the timing and the language used—and the lack of other actors pushing for the Fed to hear from other voices—we find it very likely that Fed Up was responsible.
- Fed Up representatives met with 10 of the 12 regional Fed presidents. Following a particularly productive meeting with the president of the San Francisco Fed, Reuters published a story headlined “Fed’s Williams vows more transparency after meeting with Fed Up.” 20 Press coverage regarding a November 2015 meeting with the new head of the Dallas Fed also suggested a useful exchange.21
While we’ve been positively surprised by the campaign’s access to date, we doubt that it has yet been able to build enduring relationships or cause meaningful shifts in policymakers’ views.
2.3.1 Jackson Hole Symposium
Our impression is that Fed Up was successful in achieving its goals at the 2015 Jackson Hole Economic Policy Symposium. The campaign received substantial press coverage, as discussed above, and Fed Up representatives were able to interact with some influential policymakers. We believe the campaign’s presence was felt by policymakers and helped demonstrate that the public is interested in actions taken by the Fed.
When Yellen was asked about the protesters at the press conference after the September FOMC meeting, her response was ambiguous, as we would expect.22
The White House’s chief economic advisor, Jason Furman, spoke at the Fed Up event for approximately 45 minutes, discussing pro-growth monetary policy and concerns about Federal Reserve governance, and inviting Fed Up representatives to visit with him in Washington, DC.
2.3.2 Regional Fed selection process
We believe that Fed Up did not greatly influence the outcomes of the Dallas, Philadelphia, and Minneapolis Fed president selection processes that took place in 2015. Our impression is that the campaign had not yet built up sufficient power and influence to substantially affect the process.
2.4 Fed Up 2015 Budget
Fed Up’s budget for 2015 was approximately $1.1 million, of which our previous grant contributed $750,000.
CPD told us that in 2015, Fed Up spent:
- $485,000 on subgrants
- ~$290,000 on internal staff
- ~150,000 on convenings (including Jackson Hole)
- ~$25,000 on communications
- $150,000 on overhead
3. Grant renewal
The campaign continues to advance the same broad substantive23 and procedural24 goals as it has over the past year, including calling for looser monetary policy and more transparency from the Fed and the Regional Banks.
The main changes with respect to these goals this year are that:
- Fed Up won’t have the Dallas, Minneapolis, and Philadelphia opportunities to organize around on the procedural side.
- The Fed has raised interest rates for the first time since the Great Recession, and may continue to slowly raise rates rather than holding them steady. Fed Up told us that it expects it to be somewhat tactically easier to campaign for the Fed to change what it is doing (i.e. not to continue raising rates) rather than to campaign for the Fed to continue with what it was doing (which was Fed Up’s main message until the recent rate raise), though we don’t have a sense of how this affects the overall likelihood of campaign impact.
- 2016 is a presidential election year, which is likely to affect the political media environment.
- The campaign now has more community-based partnerships, and stronger relationships with regional and national members of its coalition.
3.1 Budget and proposed activities
The initial 2016 budget given to us by Fed Up was for $4 million, but we also requested budgets for $2 million and $3 million. Each of these budgets would be a substantial increase from 2015.25
We expect Fed Up would spend a $3 million budget approximately as follows:
- $1.5 million regranted to local partners
- $650,000 for national staff
- $250,000 to national partners
- $600,000 for other costs, including events, polling, lobbying, and overhead.
The campaign’s current funders include several large progressive funders, and CPD also receives some general support from a number of others. After discussion with CPD, we don’t believe the support from these funders is likely to dramatically increase in the near future.
3.2 Case for this grant
We see the case for this grant as fairly similar to the rationale we laid out for making the previous grant. This time around, we’d summarize the case as follows:
- Perspectives on the FOMC about how to weigh tradeoffs between unemployment and inflation in monetary policymaking seem to range between placing equal weight on a percentage point of each and placing vastly more weight on inflation. In contrast, we see the negative humanitarian impact of a point of unemployment as significantly greater than the humanitarian impact of a point of inflation,26 and accordingly worry that the Fed has been persistently too tight in recent years. (Of course, we agree that the Fed cannot arbitrarily or indefinitely lower unemployment, but we think policy would be better in humanitarian terms if the Fed placed higher weight on a point of unemployment than a point of inflation.)
- We believe the Fed is adept at slowing and moderating inflationary growth, but has had less success speeding growth following economic weakness. Because it seems to be the less reversible path, we see asymmetric risks from tightening too soon.27 (In our experience, those in favor of tightening sooner typically reply that waiting to tighten now means that larger moves could be required later, potentially triggering a recession. We take the point but think it should be possible to tighten later without causing a recession.)
- It seems to us that the Fed is currently held responsible for inflation to a greater extent than it is held responsible for persistent output gaps. This creates excess pressure on the Fed to prioritize minimizing the risk of inflation relative to a more balanced commitment to both sides of its dual mandate.
- During the Great Recession and the following recovery, our impression is that a common public narrative was that the Fed was doing as much as it could feasibly do to support the economy by keeping interest rates at zero. However, there are a suite of options the Fed could have taken to do more, some of which it employed to some extent, such as using negative interest rates (as some European nations have experimented with in recent years), quantitative easing, the Evans Rule, nominal gross domestic product (NGDP) level targets, and a higher inflation target. It is possible that the Fed ended up at the edge of public knowledge and support by chance, but it seems likely to us that the Fed was bound to some extent by public perceptions of what was permissible, and with a wider window of public acceptance, it may have done more to support the economy. Given the depth of the recession, the slow recovery, and the still-below-target inflation rates, it seems likely to us that more radical policies would have been extremely valuable, and we do not see the Fed as having fully adopted this lesson. Indeed, in former Fed Chair Ben Bernanke’s memoir, he reports that the Fed considered and rejected the possibility of adopting a nominal GDP target, in part because of concerns about being able to credibly commit to such a target when it would be vulnerable to Congressional override.28
- We expect that the next recession is likely to occur before interest rates return to “normal” levels and that accordingly “unconventional” forms of monetary stimulus are likely to be necessary. We think the Fed is more likely to be able to implement such stimulus if there are stronger public advocates for the importance of expansionary monetary policy. As things stand now, we expect that during the next recession, the FOMC would mostly hear from critics claiming it was being too aggressive in responding, and we see reversing that balance as potentially highly beneficial
- We believe increasing transparency and accountability in the regional Federal Reserve Banks is likely to be attainable, and more likely than not to lead to better outcomes. While we don’t see large direct utilitarian consequences for this consideration, there seems to be a strong procedural presumption in favor of a more credible, transparent selection process for regional Federal Reserve Bank board members and presidents.
3.3 Risks of the grant
We consider this an unusually risky grant. Experts disagree about this subject, and it is possible that this grant could backfire by provoking opponents of more accommodative policies to become better-organized. Overall, the risks described last year29 continue to apply, though the risk of straightforward programmatic ineffectiveness seems to have been significantly reduced by the successes of 2015. We find it plausible that in the future, Fed Up may continue to press the Fed to keep interest rates low at a point where we believe the ideal rate is higher than what Fed Up would advocate for. We feel this risk is acceptable.
4. Plans for learning and follow-up
4.1 Key questions for follow-up
- Can Fed Up build enduring relationships with policymakers?
- Does Fed Up continue to receive media attention?
- Does Fed Up appear to have an effect on the Fed’s decision-making about potential further interest rate increases?
- In the event of a recession, is there evidence that Fed Up had an effect on the Fed’s response?
4.2 Follow-up expectations
We expect to have a conversation with campaign staff roughly every 3 months for the duration of the grant, with public notes if the conversation warrants it.
When the next recession occurs, we plan to attempt a more holistic and detailed evaluation of the grant’s performance. We may check the transcripts of 2016 FOMC meetings after they are released in 2022 to see whether any of the FOMC members discuss meetings with workers that inform their perspectives on policy.
5. Our process
We monitored the campaign throughout 2015 and had conversations with Ady Barkan of CPD about the campaign’s plans and progress. We followed the media surrounding Fed Up and its interactions with policymakers. Karl Smith, who worked with us in 2015 as a consultant, attended the Jackson Hole Symposium and reviewed some of the campaign’s 2015 activities with us.
|CPD 2015: Mind the Gap||Source (archive)|
|CPD 2015: Poll on Monetary Policy||Source (archive)|
|CPD 2015: Wall Street, Main Street, and Martin Luther King Jr. Boulevard||Source (archive)|
|CPD 2015: Whose Recovery?||Source (archive)|
|CPD Federal Reserve Campaign Paper||Source|
|Fed Up 2015-2016 Press Clippings||Source|
|Fed Up One Pager||Source|
|Fed Up Website||Source (archive)|
|Federal Reserve Press Release, April 13, 2015||Source (archive)|
|Federal Reserve Transcript of Chair Yellen’s Press Conference, September 17, 2015||Source (archive)|
|Ip 2014||Source (archive)|
|Jean 2015||Source (archive)|
|Prior 2015||Source (archive)|
|Robert Reich “What’s the Fed?” Video||Source (archive)|
|Saphir 2015||Source (archive)|
|Spross 2015||Source (archive)|
|Warmbrodt 2015||Source (archive)|
|Washington Post 2015||Source|
|Yglesias 2015||Source (archive)|