The Fed has at its disposal mostly put money in the hands of the affluent

WASH POST

In the most difficult economy in a generation, middle-income and poor Americans are hurting the worst. Congress is tied in knots, barely able to pass even the most basic measures to help.

That has put pressure on the one arm of government with the power and the flexibility to try to boost ordinary Americans’ fortunes: the Federal Reserve. But the limited policies the Fed has at its disposal mostly put money in the hands of the affluent, at least through their direct effects. The affluent, in turn, are less likely than most to spend that money in the wider economy.

That may be a key reason that a series of dramatic steps by the central bank has not done more to raise living standards for American workers.

The Fed has aimed to strengthen growth and lower joblessness by pumping cash into the economy, buying vast amounts of government bonds using newly printed money.

The bond purchases have pushed up the stock market, in which the wealthy are much more heavily invested than the poor and the middle class. The bond purchases also have helped lower mortgage rates, and the affluent are more likely to buy a home — and have bigger homes to refinance — than those of lesser means.

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