I have been watching Ben Bernanke, chairman of the Federal Reserve Board, testify this morning before the Senate Banking Committee.
He has sounded a lot like Paul Krugman.*
Krugman, an economist of distinction who also happens to be a liberal, has been telling anyone who will listen that all the scary talk about the national debt is misplaced, considering that we have a genuine jobs crisis going on right now.
Bernanke said this morning:
High unemployment has substantial costs, including not only the hardship faced by the unemployed and their families, but also the harm done to the vitality and productive potential of our economy as a whole.
Ya think? He also said—again sounding like Paul Krugman:
In terms of the near-term recovery, there is a sense in which monetary and fiscal policy are working at cross purposes. To some extent, the fiscal policy decisions being made are mismatched with the timing of the problem. The problem is a longer-term problem, and should be addressed over a longer time frame in a way that, to the extent possible, it does no harm to the ongoing recovery.
In other words, the actions of Congress (fiscal policy—focusing only on long-term debt) are working against the Fed’s actions (monetary policy—buying government bonds now in order to help stimulate the economic recovery) and the result of those “cross purposes” is sluggish growth and needlessly high unemployment.
Now, we have to ask ourselves: Why would congressional Republicans, who are leading the charge when it comes to ginning up fear over our long-term debt problems, want to work against the economic recovery?
You can supply your own answer to that question. Suffice it to say here that we not only have most economists in the country saying it, including Paul Krugman, we now have clearly on the record the chairman of the Federal Reserve Board saying it too: Stop worrying so much about the future and concentrate on the now. There are still a lot of folks suffering from the Great Recession.
As for the dreaded sequestration, Bernanke supported the Congressional Budget Office’s “reasonable estimate” that the automatic $1.2 trillion spending cuts due to begin on Friday will dampen economic growth in 2013 by 0.6% and cost 750,000 jobs. He also said that, in terms of the effects on economic growth, it didn’t matter much how the cuts were made, whether judiciously or injudiciously. That’s simply too much money to extract from the economy in the short term, even though “the sequestration takes place over time” and its impact “would probably build over a period of months.”
Bernanke also made a point about the constant battles over fiscal policy, what with cliffs, sequestration, and continuing budget resolutions, which cause enormous amounts of uncertainty for everyone and which Republicans use as devilish leverage to drastically cut spending. He said:
Uncertainty itself is costly.
Yes, the uncertainty created by hostage-taking Republicans, again and again, is costly, even though no one can exactly quantify it. But I doubt even the Fed chairman, trying to talk sense to the kidnappers, will help.
Ultimately, the American people will have to send the kidnappers a message because, in our democracy, the people are, paradoxically, both the hostages and the hostage rescuers.
* Even though the two players have had their disagreements in the past.