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What Bernanke could do for stimulus

bernankeonstim.JPGThere's been a fair amount of talk about all the innovative and odd techniques that Federal Reserve Chairman Ben Bernanke could use to kick-start the economy, but Annie Lowrey rightly focuses on the most straightforward of the options: Bernanke could simply ask them nicely.

Bernanke might think the economy needs more stimulus, and almost certainly thinks the best way for that to happen is for Congress to authorize additional stimulus spending — jobs programs, public works projects, additional Supplemental Nutrition Assistance Program funding, state aid, expanding the unemployment insurance system, what have you — since interest rates have nowhere to fall.

He could have attempted to convince Congress to do that. He could have warned about the peril of rising unemployment leading to a double dip. He could have said, “Absent additional congressional action, the Federal Reserve, in accordance with its mandate to encourage full employment, will attempt to push up price levels using x and y methods.”

There'd be nothing unprecedented about a Federal Reserve chairman weighing in on a policy debate. Alan Greenspan testified in favor of the Bush tax cuts, offering the rather baroque argument that large surpluses would spur the government to invest in -- and thus assume some control of -- private companies. Bernanke himself has repeatedly warned Congress that it needs to reform entitlements because projected deficits are beyond what the country can handle. Arguing in favor of fiscal stimulus -- particularly if it allows the Federal Reserve to avoid attempting new monetary tricks and assuming a worrying new role in the economy -- would fit this mold exactly, and would transform the discussion over stimulus.

But Bernanke hasn't even brushed against this topic, which makes me think Annie is right to say that "Bernanke does not think the economy needs more stimulus," or at least does not think the need for stimulus is acute enough for him to argue in favor of it or orient the Fed towards doing anything about it. But that's just speculation. Maybe our ace Fed reporter Neil Irwin will weigh more informed testimony.

Photo credit: Joshua Roberts/Bloomberg.

By Ezra Klein  |  July 26, 2010; 2:21 PM ET
Categories:  Federal Reserve  
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I wonder how much it takes to teach Ezra whose interests the Fed really serves. When Clinton wanted to do a really pathetic amount of stimulus or invest in job training, Greenspan was all deficit-deficit-deficit, until the point the deficit was gone and then he was magically in favor of Bush tax cuts for the rich. Bernanke is similarly very open-handed about saving the banks, with minimal or no oversight about where the money's going, but now wants to lecture us about austerity for the little people (ie the unemployed or the rest of us). Gee, I wonder why Ben is silent about stimulus that could help the broader economy and not just the financial sector? Could it be because he wants to serve that sector's interests and no one else's? Ezra says, Say it ain't so! If you look at what people do or don't do, that's an excellent clue to where their priorities lie.

Posted by: redscott1 | July 26, 2010 2:48 PM | Report abuse

The Fed could buy stuff on ebay. A paypal account is easy to get, and linking it to a bank account: that's where the Fed could go wild. It would be like a virtual helicopter!

Posted by: bdballard | July 26, 2010 3:06 PM | Report abuse

Or Bernanke is a Republican making sure Republicans win elections

Posted by: endaround | July 26, 2010 3:19 PM | Report abuse


I think it is more likely you are a Democrat who wants Democrats to win elections.

Chairman Bernanke is very likely looking out for his own legacy as opposed to any political party hoping to fine the right amount of stimulus (monetary in combination with Congress's fiscal stimulus) to make for a sound and sustainable recovery.

I think it is you and your kind that is more concerned with the November elections that Chairman Bernanke.

Posted by: lancediverson | July 26, 2010 4:06 PM | Report abuse

Haha, he is not keeping millions of Americans out of work for POLITICS you see, he is doing so for his LEGACY. That is much more reassuring.

Look I am not even going to pretend I know about economics on this level, but if he really thinks more stimulus would help then his silence on the matter is a little absurd. I think the best assumption is that he doesn't really want to pursue all these exotic "dropping money out of helicopters" strategies and is pretty much ok with massive long-term structural unemployment.

Posted by: NS12345 | July 26, 2010 4:13 PM | Report abuse


You speak as if one man can control the employment of millions of Americans. That is the problem with command and control ideology, it never understands that world economics are far too complex to be guided by one or two individuals at the top of governmental leadership, even if they are very smart.

Bernanke can no more get people employed as you or I can. He is just trying to keep the monetary policy as good as possible to sow the seeds for a sustainable growth in the future.

Posted by: lancediverson | July 26, 2010 4:32 PM | Report abuse

The Fed acts in the interests of the elite, not the middle class and the unemployed.

Posted by: SnowleopardNZ | July 26, 2010 6:02 PM | Report abuse

Major brands always give out their popular brand samples (in a way it is similar to coupons) I alway use qualityhealth to get mine enjoy your free samples

Posted by: robertjo27 | July 27, 2010 6:16 AM | Report abuse

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