In contrast to the analysis by Goldman Sachs and Moody’s Anlaytics–which both concluded the immediate cuts pushed for by House Republicans would significantly reduce economic growth–Federal Reserve Chairman Ben Bernanke claimed they would do little harm. The backing of such an important official should be a real boost to Republican efforts to push for immediate budget austerity. From The Hill:
Federal Reserve Chairman Ben Bernanke says a plan from House Republicans to cut $61 billion in spending this year would not harm economic growth.
The GOP’s proposed spending cuts, passed as part of a continuing resolution, would probably reduce “growth on the margins” and lower gross domestic product by only one- or two-tenths of a percent, Bernanke told the Senate Banking and Urban Affairs Committee.
Bernanke was originally nominated to be Fed chairman by George W. Bush in 2006, and re-nominated by President Obama. While I don’t think Bernanke lied to the Senate for partisan reasons, I do think him an individual with a conservative world view. I also think this view has led him to be wrong here like he was wrong during the buildup to the mortgage crisis, wrong about the scope of the problem, wrong about how he handled the bailout, wrong about AIG, etc.
Statements like this leave me completely unable to understand why President Obama would re-nominate Bernanke to such a critical job, instead of turning to a qualified person who is slightly more progressive. Clearly there are plenty (PDF).
Is it really so much to expect that a Democratic president would replace the Bush-appointed Bernanke with an economist whose views on the danger of immediate austerity are at least even half as liberal as a former economic adviser to his Republican rival, like Mark Zandi.
This isn’t how you win rhetorical or intellectual battles on the issue of government spending.