Fed Chairman Ben Bernanke gave a much-anticipated speech today. The Wall Street Journal reports:
Federal Reserve Chairman Ben Bernanke Friday said the central bank stands ready to provide further support to a persistently weak economy, but didn’t indicate any move was imminent despite fresh signs of feeble growth.
In a much-anticipated speech to global monetary policymakers gathered in Wyoming, Mr. Bernanke didn’t elaborate on the central bank’s remaining tools to boost the economy, which could have been a sign that the Fed was leaning toward action. Instead, he said the Fed would extend its mid-September meeting to two days to discuss options the central bank could pursue.
He put another dagger in the heart of the “recovery” meme, explaining: “It is clear that the recovery from the crisis has been much less robust than we had hoped. . . . Unfortunately, the recession, besides being extraordinarily severe as well as global in scope, was also unusual in being associated with both a very deep slump in the housing market and a historic financial crisis. These two features. . . have acted to slow the natural recovery process.” He also did not mince words about unemployment: “Our economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months. . . . In the longer term, minimizing the duration of unemployment supports a healthy economy by avoiding some of the erosion of skills and loss of attachment to the labor force.”
Considering the Fed has shot its monetary wad, it could hardly be surprising that Bernanke is not offering up any more stimulus schemes. More unusual, however, was his finger-pointing at the politicians.
As the New York Times reported:
In remarks that went well beyond his previous calls for Congress and the White House to address the nation’s long-term fiscal challenges, Mr. Bernanke suggested the process itself was broken.
“The country would be well served by a better process for making fiscal decisions,” he said.
Mr. Bernanke said he was “optimistic” about the long-run prospects for the American economy, and he gave little indication the Fed was considering any increase in its economic aid programs, although he said the issue would be revisited in September.
But Mr. Bernanke, the nation’s most prominent economist, warned that the government had emerged as perhaps the greatest threat to renewed growth.
What does Bernanke suggest? “Mr. Bernanke elaborated only briefly on his suggestion for a different process to address these issues, suggesting that politicians should consider the establishment of ‘clear and transparent budget goals, together with budget mechanisms to establish the credibility of these goals.’ ” Maybe the Senate should pass a budget? Would it help if the president submitted a plan that could be scored and not a speech seeking to score points? Bernanke wasn’t quite that candid.
In a sense, it is a powerful indictment of the administration. The president is looked to for leadership, and yet his Fed chairman says we have a political breakdown. President Obama likes to say he’s above it all, pointing fingers at “each side.” But of course, he is part of the equation and, as we can extract from Bernanke, part of the problem.
Looking at Bernanke’s criteria (“clear and transparent budget goals, together with budget mechanisms to establish the credibility of these goals”) only the House can be said to have met those requirements by passing a 2012 budget. And its Cut, Cap and Balance would certainly have fit the bill for budget goals and enforcement mechanisms. The Senate doesn’t like CCB? Well, why not amend it and send it back — in other words, do its job?
Next time Bernanke is on the Hill it would be worthwhile to ask him if he thinks it makes sense to operate with no budget. And someone might ask if all that quantitative easing really did a lick of good.