Tag Archives: Federal Reserve System

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How You Can Tell When the Deficit is a Problem



A Lot More Important Than the Federal Deficit.

A few days ago, I was stuck in the car for a long drive. Because of the complete absence of progressive talk from Orlando’s airwaves, I had no real choice but to listen to the nasal maundering of Mark Levin on the radio. Levin was very upset about the federal deficit.

Interestingly, Levin was a high-level appointee in the Reagan Administration. Dick Cheney, who was Reagan’s Defense Secretary and later the Vice President, said 10 years ago that “Reagan proved deficits don’t matter.”

I must concede that it is rather difficult to reconcile the conflicting statements of these two gentlemen, Messrs. Levin and Cheney. Evidently, they believe deficits are a terrible tragedy when a Democrat is President, and a wonderful gift when a Republican is President.

There has got to be a more objective standard than that.

Here’s one: the federal deficit is a problem when long-term interest rates are high, and not much of a problem when long-term interest rates are low. The Federal Reserve dictates short-term interest rates, but long-term rates still are, pretty much, set by the market, in its usual ruthless fashion. (Which is why James Carville said that after he dies, he “want[s] to come back as the bond market. You can intimidate everybody.”)

When long-term interest rates are high, a federal deficit competes against and “crowds out” private borrowing and investment. When long-term interest rates are low, the federal deficit is not taking away from borrowing by the private sector. On the contrary, the federal deficit is acting as a needed boost to aggregate demand in the economy, an action also known as “fiscal policy.” When the economy is slack, every dollar of reduction in federal spending takes three or four dollars off of our gross national product.

So, by that test, where are we? Well, as I explained last week, long-term U.S. interest rates are at their lowest in history. So what does that tell you about the deficit?

Sorry – I didn’t mention that there was going to be a quiz.

When Ronald Reagan was President, long-term interest rates sometimes exceeded 15% – ten times as high as long-term interest rates today. The market was screaming at the top of its lungs that the Reagan deficit was too high. And today? Silence.

Look around the world. The ten-year note in Greece yields a little less than 30%. Pakistan, 13%. Portugal and Venezuela, 12%. In those countries, the bond market is shouting, “Cut that out!”

Not here.

Thanks to all the deficit-mongering by Mark Levin, Rush Limbaugh, Fox “News,” etc., a lot of Americans are scared by the federal deficit. The advice from Democratic pollsters is to go along with this hand-wringing. But there is an alternative: Explain to the American people when a federal deficit is bad, and when it is not.

Like I just did.

Courage,

Alan Grayson

Black History, ~ FDA/USDA ~~ Alerts & Safety

CONGRESS: the Republican led House the Senate considers S.3187, the FDA user fees bill & Executive nominations


the Senate Convenes: 9:30amET May 17, 2012

  • Following the prayer and the pledge, the Majority Leader will be recognized.
  • It is the Majority Leader’s intention to begin consideration of the motion to proceed Calendar #400, S.3187, the FDA user fees bill with the time until 10:30am equally divided and controlled between the two Leaders or their designees with the Republicans controlling the first half and the Majority controlling the final half.
  • At 10:30am, the Senate will proceed to Executive Session to consider the following items:
  • Executive Calendar #646, Jeremy C. Stein, of Massachusetts, to be a Member of the Board of Governors of the Federal Reserve System for the unexpired term of fourteen years from February 1, 2004 and
  • Executive Calendar #647, Jerome H. Powell, of Maryland, to be a Member of Board of Governors of the Federal Reserve System for the unexpired term of fourteen years from February 1, 2000
  • with up to 90 minutes of debate on the nominations equally divided and controlled between Senators Johnson (SD) and Shelby or their designees.
  • Upon the use or yielding back of time (at approximately 12:00pm), the Senate will vote on confirmation of the nominations in the order listed above. Each nomination will require 60-votes in the affirmative.

11:07am The Senate is considering the motion to proceed to S.3187, A bill to amend the Federal Food, Drug, and Cosmetic Act to revise and extend the user-fee programs for prescription drugs and medical devices, to establish user-fee programs for generic drugs and biosimilars, and for other purposes.

11:07am   At 10:30am, the Senate will proceed to Executive Session with 90 minutes for debate prior to votes on confirmation of the following nominations:

–          Executive Calendar #646, Jeremy C. Stein, of Massachusetts, to be a Member of the Board of Governors of the Federal Reserve System for the unexpired term of fourteen years from February 1, 2004; and

–          Executive Calendar #647, Jerome H. Powell, of Maryland, to be a Member of Board of Governors of the Federal Reserve System for the unexpired term of fourteen years from February 1, 2000.

If all time is used, these votes will begin at approximately 12:00 noon today. Both nominations are subject to 60 vote thresholds.

The time until 10:30am is equally divided and controlled between the two Leaders or their designees, with the Republicans controlling the first half and the Majority controlling the second half.

The Senate is considering the motion to proceed to S.3187, A bill to amend the Federal Food, Drug, and Cosmetic Act to revise and extend the user-fee programs for prescription drugs and medical devices, to establish user-fee programs for generic drugs and biosimilars, and for other purposes.

The time until 10:30am is equally divided and controlled between the two Leaders or their designees, with the Republicans controlling the first half and the Majority controlling the second half.

At 10:30am, the Senate will proceed to Executive Session with 90 minutes for debate prior to votes on confirmation of the following nominations:

12:01pm The Senate began a roll call vote on confirmation of Executive Calendar #646 the nomination of Jeremy C. Stein, of MA, to be a Member of the Board of Governors of the Federal Reserve System; Confirmed: 70-24

12:28pm The Senate began a roll call vote on Executive Calendar #647, the nomination of Jerome H. Powell, of MD, to be a Member of the Board of Governors of the Federal Reserve System; Confirmed: 74-21

Senator Reid filed cloture on the nomination of Paul J. Watford, of California, to be United State District Judge for the 9th Circuit. Senators should expect the cloture vote at approximately 5:30pm on Monday, May, 21.

Senator Reid also filed cloture on the motion to proceed to Legislative Calendar #400, S.3187, the FDA Safety and Innovation Act.

Senator Reid asked unanimous consent to take up and pass H.R.1905, as amended by the text of the Reid-Johnson (SD)-Shelby amendment, which is the text of S.2101, and the Reid-Johnson (SD)-Shelby amendment.

Senator Kyl objected.

There will be no further roll call votes during Thursday’s session of the Senate

WRAP UP

ROLL CALL VOTES

1)      Confirmation of Executive Calendar #646 the nomination of Jeremy C. Stein, of MA, to be a Member of the Board of Governors of the Federal Reserve System; Confirmed: 70-24

2)      Confirmation of Executive Calendar #647, the nomination of Jerome H. Powell, of MD, to be a Member of the Board of Governors of the Federal Reserve System; Confirmed: 74-21

LEGISLATIVE ITEMS

Passed Calendar #401, H.R.2415, To designate the facility of the United States Postal Service located at 11 Dock Street in Pittston, Pennsylvania, as the “Trooper Joshua D. Miller Post Office Building”.

Passed Calendar #402, H.R.3220, To designate the facility of the United States Postal Service located at 170 Evergreen Square SW in Pine City, Minnesota, as the “Master Sergeant Daniel L. Fedder Post Office”.

Passed Calendar #403, H.R.3413, To designate the facility of the United States Postal Service located at 1449 West Avenue in Bronx, New York, as the “Private Isaac T. Cortes Post Office”.

Passed H.R.4045, a bill to modify the Department of Defense Program Guidance relating to the award of Post-Deployment/Mobilization Respite Absence (PDMRA program) administrative absence days to members of the reserve components to exempt any member whose qualified mobilization commenced before October 1, 2011, and continued on or after that date, from the changes to the program guidance that took effect on that date.

Passed H.R.4119, the Border Tunnel Prevention Act.

Passed H.R.4849, Sequoia and Kings County National Parks Backcountry Access Act with a Boxer-Feinstein substitute amendment.

No EXECUTIVE ITEMS

The Senate is back on 5/21

———————————————————————————————————–

CURRENT HOUSE FLOOR PROCEEDINGS

LEGISLATIVE DAY OF MAY 17, 2012

112TH CONGRESS- SECOND SESSION

-H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 20 minutes of debate on the McKeon Amendments En Bloc No. 2.6:02:21 P.M. -H.R. 4310Amendments en bloc  offered by Mr. McKeon.6:01:49 P.M. -H.R. 4310POSTPONED PROCEEDINGS – At the conclusion of debate on the Polis amendment, the Chair put the question on adoption of the amendment and by voice vote, announced that the noes had prevailed. Mr. Polis demanded a recorded vote and the Chair postponed further proceedings on the question of adoption of the amendment until a time to be announced.5:48:50 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 10 minutes of debate on the Polis amendment No. 12.5:48:48 P.M. -H.R. 4310An amendment, offered by Mr. Polis,  numbered 12 printed in House Report 112-485 to reduce the amount for the ground-based midcourse missile defense system by $403 million.5:47:51 P.M. -H.R. 4310POSTPONED PROCEEDINGS – At the conclusion of debate on the Markey amendment, the Chair put the question on adoption of the amendment and by voice vote, announced that the noes had prevailed. Mr. Markey demanded a recorded vote and the Chair postponed further proceedings on the question of adoption of the amendment until a time to be announced.5:34:20 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 10 minutes of debate on the Markey amendment No. 11.5:34:17 P.M. -H.R. 4310An amendment, offered by Mr. Markey,  numbered 11 printed in House Report 112-485 to delay the development of the new long-range nuclear-capable bomber by ten years and the funding in the bill would be reduced by $291,742,000, which is the amount planned for this bomber.5:34:10 P.M. -H.R. 4310The Committee resumed its sitting.5:33:15 P.M. -The House received a message from the Senate. The Senate passed H.R. 4849, with an amendment, H.R. 2415, without amendment, H.R. 3220, without amendment, H.R. 3413, without amendment, H.R. 4045, without amendment, H.R. 4119, without amendment.5:33:14 P.M. -The Committee rose informally to receive a message from the Senate.5:33:13 P.M. -H.R. 4310On agreeing to the Quigley amendment; Failed by voice vote.5:21:24 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 10 minutes of debate on the Quigley amendment No. 10.5:21:22 P.M. -H.R. 4310An amendment, offered by Mr. Quigley,  numbered 10 printed in House Report 112-485 to eliminate funds available for procurement of the V-22 Osprey aircraft, and puts the savings toward deficit reduction.5:21:03 P.M. -H.R. 4310On agreeing to the Conyers amendment; Failed by voice vote.5:07:52 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 10 minutes of debate on the Conyers amendment No. 9.5:07:48 P.M. -H.R. 4310An amendment, offered by Mr. Conyers,  numbered 9 printed in House Report 112-485 to terminate the F-35B aircraft program. Would authorize the Secretary to procure an additional number of F/A-18E or F/A-18F aircraft to replace the F-35B aircraft.5:06:26 P.M. -H.R. 4310POSTPONED PROCEEDINGS – At the conclusion of debate on the Bartlett amendment, the Chair put the question on adoption of the amendment and by voice vote, announced that the ayes had prevailed. Mr. Smith (WA) demanded a recorded vote and the Chair post poned further proceedings on the question of adoption of the amendment until a time to be announced.4:53:54 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 10 minutes of debate on the Bartlett amendment No. 8.4:53:51 P.M. -H.R. 4310An amendment, offered by Mr. Bartlett,  numbered 8 printed in House Report 112-485 to prevent federal agencies from requiring contractors to sign an anti-competitive and costly project labor agreement (PLA) as a condition of winning a federal construction contract.4:52:11 P.M. -H.R. 4310POSTPONED PROCEEDINGS – At the conclusion of debate on the Rooney amendment, the Chair put the question on adoption of the amendment and by voice vote, announced that the noes had prevailed. Mr. Smith (WA) demanded a recorded vote and the Chair postponed further proceedings on the question of adoption of the amendment until a time to be announced.4:40:53 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 10 minutes of debate on the Rooney amendment No. 7.4:40:49 P.M. -H.R. 4310An amendment, offered by Mr. Rooney,  numbered 7 printed in House Report 112-485 to direct the Department of Defense to hold detainee trials in the US Facility at Guantanamo Bay, Cuba, and not in the United States.4:40:27 P.M. -H.R. 4310POSTPONED PROCEEDINGS – At the conclusion of debate on the Connolly (VA) amendment, the Chair put the question on adoption of the amendment and by voice vote, announced that the ayes had prevailed. Mr. Connolly (VA) demanded a recorded vote and the Chair postponed further proceedings on the question of adoption of the amendment until a time to be announced.4:33:32 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 10 minutes of debate on the Connolly (VA) amendment No. 6.4:33:29 P.M. -H.R. 4310An amendment, offered by Mr. Connolly (VA),  numbered 6 printed in House Report 112-485 to withhold funds from the Coalition Support Fund until the Secretary of Defense certifies that Pakistan has opened the Ground Lines of Communication, is allowing the transit of NATO supplies through Pakistan into Afghanistan, is supporting the retrograde of U.S. equipment out of Afghanistan.4:32:00 P.M. -H.R. 4310POSTPONED PROCEEDINGS – At the conclusion of debate on the Lee amendment, the Chair put the question on adoption of the amendment and by voice vote, announced that the noes had prevailed. Ms. Lee demanded a recorded vote and the Chair postponed further proceedings on the question of adoption of the amendment until a time to be announced.4:07:52 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 20 minutes of debate on the Lee amendment No. 5.4:07:47 P.M. -H.R. 4310An amendment, offered by Ms. Lee (CA),  numbered 5 printed in House Report 112-485 to end the war in Afghanistan by limiting funding to the safe and orderly withdrawal of U.S. troops and military contractors from Afghanistan.4:07:08 P.M. -H.R. 4310POSTPONED PROCEEDINGS – At the conclusion of debate on the Rohrabacher amendment, the Chair put the question on adoption of the amendment and by voice vote, announced that the noes had prevailed. Mr. Rohrabacher demanded a recorded vote and the Chair postponed further proceedings on the question of adoption of the amendment until a time to be announced.3:55:09 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 10 minutes of debate on the Rohrabacher amendment No. 4.3:54:39 P.M. -H.R. 4310An amendment, offered by Mr. Rohrabacher,  numbered 4 printed in House Report 112-485 to prohibit the availability of funds for assistance to Pakistan in fiscal year 2013.3:54:22 P.M. -H.R. 4310On agreeing to the Kucinich amendment; Failed by voice vote.3:39:52 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 10 minutes of debate on the Kucinich amendment No. 3.3:39:38 P.M. -H.R. 4310An amendment, offered by Mr. Kucinich,  numbered 3 printed in House Report 112-485 to prohibit the Joint Special Operations Command from conducting signature drone strikes, drone strikes against targets whose identity is not known or based solely on patterns of behavior this target.3:39:22 P.M. -H.R. 4310On agreeing to the McKeon amendments; Agreed to by voice vote.3:23:53 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 20 minutes of debate on the McKeon Amendments En Bloc No. 1.3:23:23 P.M. -H.R. 4310Amendments en bloc  offered by Mr. McKeon,  comprised of the following amendments : Amendments Nos. 2, 13, 14, 15, 16, 21, 23, 25, 27, 28, 40, 43, 57, 74, 83, 95, 97, 102, 107, and 126 printed in House Report 112-485.3:22:38 P.M. -H.R. 4310On agreeing to the McKeon amendment; as modified Agreed to by voice vote.3:11:42 P.M. -H.R. 4310DEBATE – Pursuant to the provisions H. Res. 661, the Committee of the Whole proceeded with 10 minutes of debate on the McKeon Manager’s amendment No. 1.3:11:31 P.M. -H.R. 4310McKeon amendment; modified by unanimous consent.3:11:08 P.M. -H.R. 4310An amendment, offered by Mr. McKeon,  numbered 1 printed in House Report 112-485 to make conforming changes in the bill.3:08:52 P.M. -H.R. 4310The House resolved into Committee of the Whole House on the state of the Union for further consideration.3:08:42 P.M. -H.R. 4310Considered as unfinished business. H.R. 4310 — “To authorize appropriations for fiscal year 2013 for military activities of the Department of Defense, to prescribe military personnel strengths for fiscal year 2013, and for other purposes.”2:53:01 P.M. -H.R. 5740Motion to reconsider laid on the table Agreed to without objection.2:53:00 P.M. -H.R. 5740On motion to suspend the rules and pass the bill Agreed to by the Yeas and Nays: (2/3 required): 402 – 18 (Roll no. 262).2:46:28 P.M. -H.R. 5740Considered as unfinished business. H.R. 5740 — “To extend the National Flood Insurance Program, and for other purposes.”2:46:13 P.M. -H. Res. 568Motion to reconsider laid on the table Agreed to without objection.2:46:12 P.M. -H. Res. 568On motion to suspend the rules and agree to the resolution, as amended Agreed to by the Yeas and Nays: (2/3 required): 401 – 11, 9 Present (Roll no. 261).2:38:34 P.M. -H. Res. 568Considered as unfinished business. H. Res. 568 — “Expressing the sense of the House of Representatives regarding the importance of preventing the Government of Iran from acquiring a nuclear weapons capability.”2:38:20 P.M. -UNFINISHED BUSINESS – The Chair announced that the unfinished business was the question of adoption of motions to suspend the rules which had been debated earlier and on which further proceedings had been postponed.2:37:58 P.M. -H. Res. 661Motion to reconsider laid on the table Agreed to without objection.2:37:57 P.M. -H. Res. 661On agreeing to the resolution Agreed to by recorded vote: 244 – 178 (Roll no. 260).2:28:56 P.M. -H. Res. 661On ordering the previous question Agreed to by the Yeas and Nays: 236 – 182 (Roll no. 259).12:54:43 P.M. -H. Res. 661DEBATE – The House proceeded with one hour of debate on H. Res. 661.12:54:40 P.M. -H. Res. 661Considered as privileged matter. H. Res. 661 — “Providing for further consideration of the bill (H.R. 4310) to authorize appropriations for fiscal year 2013 for military activities of the Department of Defense, to prescribe military personnel strengths for fiscal year 2013, and for other purposes.”12:48:28 P.M. -H. Res. 661On motion to consider the resolution Agreed to by voice vote.12:48:18 P.M. -H. Res. 661At the conclusion of debate on the Larson (CT) point of order, the Chair put the question on consideration of the resolution.12:34:27 P.M. -H. Res. 661POINT OF ORDER AGAINST CONSIDERATION – Mr. Larson (CT) made a point of order that the provisions of H. Res. 661 violate clause 9(b) of rule XXI. Under clause 9(b) of rule XXI, the House proceeded with 20 minutes of debate on the question of consideration. At the conclusion of debate on the question of consideration, the Chair will put the question to wit: Will the House now consider the resolution?12:34:18 P.M. -H. Res. 661The Chair recognized Mr. Bishop (UT) who by direction of the Committee on Rules called up H. Res. 661 and asked for its immediate consideration.12:29:40 P.M. -The Speaker laid before the House a message from the President transmitting a notification that the national emergency with respect to Burma will continue beyond May 20, 2012 – referred to the Committee on Foreign Affairs and ordered to be printed (H. Doc. 112-110).12:04:20 P.M. -ONE MINUTE SPEECHES – The House proceeded with one minute speeches which by direction of the Chair, would be limited to 15 per side of the aisle.12:03:35 P.M. -Without objection, the Chair recognized Rep. Reed (NY) for the purpose of welcoming Reverend Dr. Ken Chroniger as Guest Chaplain.12:02:34 P.M. -PLEDGE OF ALLEGIANCE – The Chair designated Mr. Reed to lead the Members in reciting the Pledge of Allegiance to the Flag.12:02:29 P.M. -The Speaker announced approval of the Journal.  Pursuant to clause 1, rule I, the Journal stands approved.12:01:04 P.M. -Today’s prayer was offered by Reverend Dr. Ken Chroniger, Alfred Station Seventh Day Baptist Church, Alfred Station, New York.12:00:47 P.M. -The House convened, returning from a recess continuing the legislative day of May 17.11:12:35 A.M. -The Speaker announced that the House do now recess. The next meeting is scheduled for 12:00 P.M. today.10:00:43 A.M. -MORNING-HOUR DEBATE – The House proceeded with Morning-Hour Debate. At the conclusion of Morning-Hour, the House will recess until 12:00 p.m. for the start of legislative business.10:00:22 A.M. -The Speaker designated the Honorable John Shimkus to act as Speaker pro tempore for today.10:00:09 A.M. -The House convened, starting a new legislative day.

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Gov.Rick Perry … FED Up?


Keepin them honest or exposing the tall tales, misinformation and just plain ole lies like last night on his first debate or whatever that was. It is offensive to most if not all on Social Security by calling it a Ponzi Scheme, edging toward telling Americans that they do not believe in Evolution and when an audience applauds the support of execution and in what appears to have been a possible innocent man should provide info that proves how unqualified a Presidential Candidate is but that’s just my opinion

Governor Rick Perry told Chris Wallace on FOX News Sunday that Medicaid is such a Ponzi scheme that it would even make Mr. Ponzi feel bad.

http://youtu.be/QAzGDy5_vRA

Yes, Cenk is still making sure we all know his views

Rick Perry compares civil rights movement to fighting for lower taxes, deregulation

Rick Perry says Obama is hell bent on making America socialist…

Rick Perry Flip-Flops on immigration reform

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Economy:Bernanke Meets The Press


Federal Reserve Chairman Ben Bernanke held the first public press conference in the history of the Federal Reserve yesterday, in an attempt to bring more transparency to the central bank (which faced its first ever audit last year). “I’ve personally always been a believer in providing as much information as you can,” Bernanke told the gathered press. The conference wa s held just hours after the Federal Reserve Board announced that it will end its program of quantitative easing (QE2) — aimed at boosting the sluggish economy — on schedule in June, due to its assessment that “the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually.” However, at the same time, the Fed revised its projections for economic growth downward. Previously, the Fed had estimated that growth this year would be between 3.4 and 3.9 percent, but now it is only predicting growth at 3.1 to 3.3 percent, due to contractions in exports, construction spending and military spending. The Bureau of Economic Analysis announced today that first quarter growth registered at just 1.8 percent . And while most of the questions during the conference centered on Bernanke’s views on inflation, gas prices, and the nation’s deficit, little time was spent on arguably the most pressing problem facing the country: continued high unemployment.

‘VERY DEEP HOLE’: Bernanke acknowledged during the press conference that the nation faces a “very, very deep hole” when it comes to job creation, noting that we would have to create seven million jobs just to make up for those lost during the Great Recession. The unemployment rate currently stands at 8.8 percent, while the broader U-6 measure of underemployment is at 15.7 percent. The African-American unemployment rate is 15.5 percent, and the Hispanic unemployment rate is 11.3 percent. While the private sector has been slowly adding jobs, it would still take several years at the current pace in order to get back to full employment. In fact, at the rate of job growth that occurred in March, full employment would not be achieved until 2019. As The Wall Street Journal noted, “even adding 300,000 jobs a month would take almost five years to get back to full employment.” According to the Fed’s own estimates, the economy will not reach full employment for ano ther five years or six years, and the unemployment rate will still be between 6.8 and 7.2 percent in 2013. “The fact that we’re moving in the right direction, even though that’s encouraging, doesn’t mean that the labor market is in good shape. Obviously it’s not,” Bernanke said. To his credit, Bernanke also noted the problem with long-term unemployment, saying, “Long-term unemployment in the current economy is the worst, really the worst it’s been in the post-war period.” “We know the consequences of that can be very distressing, because people who are out of work for a long time, their skills tend to atrophy,” he added.

NO FURTHER ACTION: The Fed has a dual mandate to both ensure full employment and price stability (i.e. combat inflation). During the conference, The New York Times’ Binyamin Applebaum asked Bernanke, “Is it in the Fed’s power to reduce the rate of unemployment more quickly? How would you do that and why are you not doing it?” Bernanke replied, “While it is very, very important to help the economy create jobs and help to support the recovery, I think every central banker understands that keeping inflation low is absolutely essential to a successful economy.” Essentially, Bernanke’s response was that the Fed could do more but won’t due to worries about infla tion getting out of control. However, as many economists have noted, inflation at the moment is exceedingly low (the Fed isn’t meeting its own inflation targets, and its forecasts show inflation is contained for the foreseeable future ), while unemployment remains stubbornly high. In fact, as Nobel Prize-winning economist Paul Krugman noted, “there is no tradeoff: more expansionary monetary policy is good in terms of both unemployment and achieving the Fed’s inflation target.” And Bernanke, during his days in academia, actually chided Japan for failing to engage in more expansive monetary policy to get itself out out of its 1990’s slump. “The Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism,” Bernanke wrote in 1999. So Krugman noted that “[Bernanke’s] own theories — and for that matter the doctrine endorsed by the Fed itself — says that the central bank should be doing much more quantitative easing, not stopping with the US still facing high unemployment.” As Center for American Progress Action Fund Fellow Matthew Yglesias wrote in the journal Democracy, “The idea that a time of unusually high unemployment and unusually low inflation would be a good moment for monetary policy-makers to start caring less about growth and more about price stability, especially when we already have price stability, is bizarre.” Bernanke did say, though, that if Congress enacts spending cuts in the short-term that will slow economic growth too much, the Fed will be forced to act, and the Fed Board also announced that it will be keeping interest rates at around zero for the time being.

POLITICAL GAMESMANSHIP: Thus far, the steps to boost the economy that the Fed has taken have been too small and have thus ushered in lackluster results. But as the New York Times noted this week, “a vocal group of critics…argues that the Fed has already done far too much.” These include several Republicans in Congress, who have been fearmongering about the effect of the Fed’s attempt to spur economic growth. Sen. Mark Kirk (R-IL) wrote in a letter to Bernanke that, “you should prepare the Board for an early end to quantitative easing, along with other monetary measures to protect Americans from rising inflation.” House Republicans spent two hearings e arlier this year peppering Bernanke with questions about the specter of inflation. Senate Republicans have also refused to confirm Nobel Prize-winning economist Peter Diamond, who President Obama has nominated to the Federal Reserve Board, saying that despite his stellar economic credentials, he is not qualified for the job; Diamond is known to be an inflation “dove.” Late last year, several Republicans also introduced legislation that would strip the Fed of its responsibility for promoting full employment, with Sen. Bob Corker (R-TN) calling the Fed’s full employment mandate “inappropriate.” By focusing more on inflation than full employment, even though inflation is low while unemployment is high, Bernanke and the Fed seem to be bowing to this Republican pressure.

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ECONOMY: The Assault On Wall Street Reform


Last weekend, a spokesman for the American Bankers Association — the banking industry’s largest trade group — explained that the financial services industry is eagerly anticipating conservative control of the House of Representatives. “We had been disappointed with a number of legislative outcomes with the past Congress, and so we look forward to better outcomes with this Congress,” he said, adding that “banks expect a corrections bill to peel back some of the financial regulations passed into law this year.” Indeed, Wall Street has made no secret of its desire to water down and roll back provisions in the Dodd-Frank financial regulatory reform law, which President Obama signed in July. Dodd-Frank is the most thorough upgrade of the nation’s regulatory structure since the Great Depression, and while complete repeal is unlikely due to the President’s veto power, the banks are counting on their House Republican allies to weaken the bill in other ways, such as withholding funds or scheduling hearings designed to slow the  regulators’ rule-making process. Already, the two leading candidates to chair the House Financial Services Committee next year — Reps. Spencer Bachus (R-AL) and Ed Royce (R-CA) — have made known their desire to weaken certain provisions, while incoming presumptive House Majority Leader Eric Cantor (R-VA) told CNBC that Republicans intend to deny regulators the funds to implement Dodd-Frank. “The House has the power of the appropriations process and the leverage that comes with that essentially puts us in a position to deny the administration funding for promulgating the regulations,” Cantor said.

DEFUNDING THE CONSUMER BUREAU : House Republicans have reserved their most intense ire for the newly-created Consumer Financial Protection Bureau, which is being headed by consumer advocate and Harvard Law Professor Elizabeth Warren and is the only regulatory agency explicitly tasked with consumer protection. Rep. Jeb Hensarling (TX), one of the top Republicans on the Financial Services Committee, promised to defund the Bureau, which he believes “assaults the liberties of the consumer.” But defunding is only an effective strategy for holding back the agency until July 2011, when the Bureau will begin to receive an independent funding stream from the Federal Reserve, so Bachus has proposed changing Dodd-Frank to make the Bureau subject to the annual congressional appropriations process. Giving the Bureau an independent stream of funding is important, as it isolates the Bureau from the whims of Congress and prevents appropriators from pushing a political agenda by threatening funding cuts; the Federal Reserve and the Securities and Exchange Commission have independent budgets for the same reason. Royce, meanwhile, has said that he would revive an amendment of his that was defeated during the regulatory reform debate that would allow banking regulators to veto the agency’s rulemaking. “The safety and soundness regulator needs to have a say, needs to have final say in this,” Royce said.

DEFANGING THE REGULATORS : Dodd-Frank delegates much of its authority to regulators, who have the responsibility to craft rules meant to rein in the financial industry’s excess, while taking into consideration the necessary role of the industry. Consequently, House Republicans have been targeting these regulators in an attempt to politicize and delay their rule-making activities. Bachus, for instance, sent a letter to the newly created Financial Stability Oversight Council scaremongering about the effects of the Volcker rule, which is meant to prevent banks from engaging in risky proprietary trading with federally insured dollars. Bachus claimed that the rule will “impose substantial costs on the American economy and market participants” with “doubtful” benefits.” But as Nobel Prize-winning economist Joseph Stiglitz noted, “Through the rise of proprietary trading at our nation’s banks and the largest non-bank financial firms, firms doubled down on the accumulation of risk, much of it with little benefit to the real economy.” Bachus has also said that he wants to weaken the derivatives reform portion of the bill, calling it “overly expansive.” The derivatives title of Dodd-Frank sets up exchanges so that derivatives must be traded publicly (like stocks) and employs clearinghouses to ensure that both parties in a derivatives trade have adequate collateral backing it up. What House Republicans will likely aim to do is entice regulators to grant wide exemptions to the exchange and clearing requirements, letting all sorts of activity that is purely speculative continue to be unregulated. Senate Democrats, however, are standing tall against changes in the law. “I don’t think that major changes will take place on Dodd-Frank,” said Sen. Tim Johnson (D-SD), who will likely chair the Senate Banking Committee next year. “There is not only resistance from the Senate, but the veto is possible, too. So we should focus on realistic solutions to our problems.”

BIG BUSINESS JOINS IN : House Republicans and Wall Street banks are not alone in their fight to weaken Dodd-Frank. The U.S. Chamber of Commerce — which helped coordinate Wall Street’s campaign against financial reform — announced yesterday that “it is setting up a new unit to scrutinize regulatory efforts of the Obama administration, taking special aim at the health care reform law and financial overhaul legislation.” “Regulation is the vehicle by which some seek to control our economy, our businesses and our lives — and left unchecked, it will fundamentally weaken our nation’s capacity to create jobs and opportunity,” said Chamber President Tom Donohue. The Chamber has already sued the SEC “over its proposed rule to give shareholders greater rights to nominate candidates to a public company’s board through proxy access balloting”; the rule was initiated as a result of Dodd-Frank. Of course, Wall Street is also very capable of lobbying for its cause itself. As the Los Angeles Times reported, “Lobbyists for banks, hedge funds and other firms have logged hundreds of meetings with federal regulators since the reform bill was signed into law.” “In all, regulators have had at least 510 meetings with lobbyists representing 325 organizations since July,” the Times found, and “more than 90% of the groups that appear in the meeting logs are banks, hedge funds and other big companies that rely on the financial industry.”