TBO.com - TBO is Tampa Bay Online

Bernanke's Days Of Sitting On Sidelines Over

ADVERTISEMENT

By NEAL LIPSCHUTZ Dow Jones News

Published: January 18, 2008

NEW YORK - As he provided common-sense guidance for a stimulus package to fight recession, Federal Reserve Chairman Ben Bernanke tacitly acknowledged the end of his effort to stay out of fiscal policy specifics.

In doing so, he accepts what many in Congress, Wall Street and the general public already assume: The chair of the U.S. central bank is also the country's top economic official and spokesman.

Bernanke on Thursday specifically supported tax rebates aimed at lower- and middle-income people, with the standard and easy-to-see rationale that those are the folks likely to immediately spend what they are given, helping keep the economy pumping.

He warned that fiscal stimulus has to be "implemented quickly" to be effective, though Washington's history is to get its fiscal stimulus out of legislative thrall only after the economy has on its own hit bottom and started to recover.

Bernanke also outlined other ways the fiscal package would have to be designed: no offsetting tax increases, perhaps tax credits to help spur business investment.

All this is a far cry from Bernanke in late 2005, nominated to be Fed chief but not yet confirmed. He then said he would leave nitty-gritty tax-and-spend decisions to people elected to make those decisions.

"I'm going to begin now, I think, a practice of not making recommendations on specific tax or spending proposals," Bernanke said in a Nov. 16, 2005, Washington Times article.

Nearly two years into his Fed reign - he was sworn in Feb. 1, 2006 - Bernanke has shifted gears.

Perhaps it is simply the enormity of the problem he and the world faces that convinced Bernanke that monetary policy can't do it alone. If there's going to be fiscal stimulus, it might as well be along lines he thinks are smart.

Maybe it's the two years and the confidence that comes with time in office. The facts handed Bernanke and his colleagues to grapple with since day one have not been easy ones.

Publicly, he didn't distinguish himself as a prognosticator, saying often that the southbound housing market after years of rapid price increases and too-easy credit still wouldn't bring down the broader economy.

On that score he has plenty of company.

Now, there's straight talk from the Fed chairman on "substantive" Fed reaction to the slowdown/recession. That's widely interpreted as a 50-basis-point cut in the federal funds target at the next rate-setting meeting later this month.

There also are specifics on what Congress should do to help as far as tax policy goes.

It probably couldn't have turned out the way Bernanke originally planned, hewing closely only to the topics the Fed actually has a real say in: monetary policy and bank regulation.

Not after the precedent set by Bernanke's predecessor, Alan Greenspan, who in his 18 years at the helm at the Fed held forth before Congress on everything from Social Security reform to the need for more and better community colleges to retrain those displaced by globalization.

The Fed chairman became the de facto face and voice of the full economy. Members of Congress would trade snippets of Greenspan quotes to try to show the Fed chief was on their side in various debates.

There is a Council of Economic Advisers in every administration and it has a chairman. It used to be, for a short time, Bernanke.

It really doesn't matter anymore who's in that post, though. When it comes to what's perceived as the needed advice on crucial questions of fiscal and broader economic policy, the person to see is the Fed chairman.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT