WASHINGTON — When it comes to the deficit, Ben S. Bernanke has a story, and he’s sticking to it. Mr. Bernanke, the Federal Reserve chairman, warned on Wednesday that “the federal budget appears to be on an unsustainable path,” but also recognized that an “exceptional increase” in the deficit had been necessary to ease the pain of recession. In nearly two hours of questioning by the House Budget Committee, however, Mr. Bernanke gave potential succor to members of both parties, while refusing to side with either of them. To Republicans, he offered warnings about the fiscal perils of an aging population and the potential threat of soaring long-term interest rates. To Democrats, he made it clear that persistently high unemployment was a drag on growth and said that additional short-term stimulus spending might be needed. All the while, Mr. Bernanke refused to endorse any particular spending cuts or tax increases, or even specify the balance between the two. And he was not subtle about his strategy. “I’m trying to avoid taking sides on this because it’s really up to Congress to make those decisions,” he told Representative Michael K. Simpson, Republican of Idaho. “But we need your expertise on it,” Mr. Simpson pressed. “Well, no,” Mr. Bernanke replied. “Plenty of people have that kind of expertise, including the Congressional Budget Office and others.” With inflation well below the Fed’s unofficial target of about 2 percent, attention has turned to the other side of the central bank’s mandate: maximizing employment. At the same time, the debt crisis roiling Europe has made deficit-cutting a potent topic. Mr. Bernanke suggested that the United States had a while longer — but not much — before it would have to pull in the reins. “This very moment is not the time to radically reduce our spending or raise our taxes, because the economy is still in a recovery mode and needs that support,” Mr. Bernanke told Representative Bob Etheridge, Democrat of North Carolina. In the next breath, however, he added that continuing deficits risked a “potential loss of confidence in the markets.” Representative Paul Ryan of Wisconsin, the top Republican on the committee, focused his opening statement on Europe. “What we are watching in real time is the rough justice of the marketplace and the severe economic turmoil that can be inflicted on profligate countries mired in debt,” he said. But if Mr. Ryan had hoped for similarly dire pronouncements from Mr. Bernanke, he was disappointed. “If markets continue to stabilize, then the effects of the crisis on economic growth in the United States seem likely to be modest,” Mr. Bernanke testified. “Although the recent fall in equity prices and weaker economic prospects in Europe will leave some imprint on the U.S. economy, offsetting factors include declines in interest rates on Treasury bonds and home mortgages, as well as lower prices for oil and some other globally traded commodities.” Representative Jeb Hensarling, Republican of Texas, cited the research of the economist Carmen M. Reinhart, who has found that growth tends to stall in countries where the national debt reaches 90 percent of gross domestic product. The United States is at just about that threshold. “I don’t think there’s anything magic about 90 percent,” Mr. Bernanke said, while noting that in the worst-case projections by the Congressional Budget Office, “debt and interest payments are going to get explosive in 10 or 15 years.” When Representative Jim Jordan, Republican of Ohio, asked Mr. Bernanke to “talk to me about those tax increases that we know are going to happen,” Mr. Bernanke replied: “We have a recovery under way now. So in the very near term, increased taxes, cuts in spending, that are too large would be a negative, would be a drag on the recovery.” But he reiterated that “I’m not going to try to adjudicate for Congress” between tax and spending measures. Mr. Bernanke’s nimbleness in navigating deficit politics reflects his position as the most visible bridge between two administrations, having been appointed by President George W. Bush in 2006 and then reappointed by Mr. Obama to a second four-year term.
Mr. Bernanke has seemed more optimistic, or at least confident, since the crisis peaked in 2008. “As long as we have the confidence of the markets that we will be able to exit from this situation with a sustainable fiscal program, then I think we’ll be O.K.,” he told Mr. Simpson of Idaho.
How long that confidence will last, Mr. Bernanke did not say. Only after several rounds of back-and-forth did he agree with Representative Chet Edwards, Democrat of Texas, that tax cuts do not entirely pay for themselves. And he danced around with Representative Gerald E. Connolly, a Virginia Democrat, on whether the Obama administration’s $787 billion stimulus package last year was “necessary.” Mr. Bernanke would only say it was “useful.” “It must be nice to be an economist,” Mr. Connolly replied.
Mr. Bernanke has seemed more optimistic, or at least confident, since the crisis peaked in 2008. “As long as we have the confidence of the markets that we will be able to exit from this situation with a sustainable fiscal program, then I think we’ll be O.K.,” he told Mr. Simpson of Idaho.
How long that confidence will last, Mr. Bernanke did not say. Only after several rounds of back-and-forth did he agree with Representative Chet Edwards, Democrat of Texas, that tax cuts do not entirely pay for themselves. And he danced around with Representative Gerald E. Connolly, a Virginia Democrat, on whether the Obama administration’s $787 billion stimulus package last year was “necessary.” Mr. Bernanke would only say it was “useful.” “It must be nice to be an economist,” Mr. Connolly replied.
No comments:
Post a Comment