What Bernanke could do for stimulus
There'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.
July 26, 2010; 2:21 PM ET
Categories: Federal Reserve
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