We touched on this briefly yesterday, but Federal Reserve Chairman Ben Bernanke once again presented Washington with some common-sense Keynesian economics yesterday, which once again fell on deaf ears.
Bernanke covered quite a bit of ground over the course of 45 minutes, but in terms of political salience, the comments that were of particular interest were the Fed chairman’s complaints about “fiscal restraint at the federal, state and local levels,” which he said undermines economic growth.
“[W]e have been seeing fiscal consolidation, particularly at the state and local level, of course, tight budgets have led to a lot of layoffs and cancellation of projects and so on.
“I understand that these are necessary steps from the perspective of individual states and localities; I’m not criticizing that. It’s just a fact, though, that these contractions are affecting the pace of growth in the broader economy.”
Remember, Republicans, from Mitt Romney to every GOP member of Congress, think this is backwards. Bernanke is trying to make them understand that taking money out of the economy and laying off public-sector workers makes the economy worse, but when the economy gets worse, Republicans blame Obama and call once again for taking money out of the economy and laying off public-sector workers.
We could lower unemployment dramatically today if Congress took Bernanke’s advice, but in the eyes of today’s GOP, the Republican Fed Chairman, first appointed by Bush/Cheney, is calling for big-government socialism that undermines free enterprise.
The Fed chairman added, by the way, “[M]onetary policy is not a panacea. Monetary policy by itself is not going to solve our economic problems. We welcome help and support from any other part of the government, from other economic policymakers. So collaboration would be great.” This isn’t exactly subtle — Bernanke has been pleading with Congress for two years to consider fiscal stimulus, but Republicans refuse. Then, as the economy slows, they once again blame the president and start the process over again. Bernanke’s reluctance to take bold steps is a constant source of frustration, which may well cost Obama his presidency, but that doesn’t change the fact that today’s Republican Party still makes him look like a wild-eyed liberal by comparison.
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