When Fed chairman Ben Bernanke testified before the Joint Economic Committee of Congress today (his first trip to the Hill in a while), he exhibited an exceptionally clear purpose: telling Congress to stop the austerity already! Wonkblog’s Neil Irwin summed it up efficiently:
Even as state and local governments are becoming less of a drag on growth, Bernanke says in his prepared testimony before the Joint Economic Committee, “fiscal policy at the federal level has become significantly more restrictive.”
“In particular,” his testimony says, “the expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year.”
He adds that with the Fed’s interest rate policies already near zero, “monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.”
Bernanke went on to lash Congress for all but reversing his own formula of combining long-term deficit reductions measure with short-term caution or even stimulus (which has pretty much been the formula of most Democrats, though it’s been obscured or even contradicted by the occasional White House and/or congressional lurches into short-term fiscal hawker). But despite the alleged laser-like focus of both parties on jobs, the economy, and fiscal policy, the rebuke was difficult to hear over Scandalmania.