The Real Problem with Bernanke

[RoyGBiv]

While everyone is freaking out over a metaphor, delivered in a portion of Bernanke's Dec. 3rd testimony that consumed less than five minutes including both the question and the answer, I thought it might be instructive to point to the truly damning nature of his remarks overall.

The apparent assault on Medicare and Social security was not, as has been portrayed, a call to repeal Social Security nor to gut Medicare. It was, however, a political statement from the supposedly non-political head of the supposedly non-political Federal Reserve, which seeks to maintain its independence so it can continue being non-political. The problem with so-called entitlements is real. Even liberals are saying this, though in a different manner, when they speak of the need to curb skyrocketing medical costs in order to control the deficit. In actuality, Bernanke's remarks badly mimic those of our less-than-liberal but nonetheless intelligent, thoughtful and industrious President when he states "We've got a long- term structural deficit that is primarily being driven by health care costs, and our long-term entitlement programs." The need to reform the system does not naturally equate to gutting it or eradicating it.

Clearly, however, Bernake's comments could be construed to mean the latter, and this, the fact that he said anything at all with such political overtones is the problem.

Lost in the hoopla stirred up by Ryan Grim's sensationalist headline in the Huffington Post, which was, naturally, sensationalized even more be the netizens of DU, is the fact that Bernanke made yet another political statement that is more concrete and has far more dire consequences for our immediate problem of addressing the fact that the stimulus was too small and that nothing, at all, is being done to boost jobs creation.

As reported in The Hill and commented upon by Paul Krugman, Ezra Klein, and Brad DeLong, among others, Bernanke, responding to a question about the effectiveness of the stimulus and the need for more, did an unprofessional, bad, bad thing. He said it is a "little bit early" to be talking about a second stimulus.

His comments on this point will have far more widely reaching, immediate effects than his unfortunate, off-the-cuff metaphor about bank robbers. It will provide fuel for Republicans and their conservative Democratic allies who didn't even want the first stimulus passed and have so mutated the political discourse that it is now toxic even to attempt to discuss it. He makes this comments at a time when the Fed is, correctly, fighting to maintain its independence while doing one of the very things for which its independence is being called into question. Moreover, what this really says is that Bernanke has no plan for the jobs problem and his basing his non-action on falsely interpreted, seemingly partisan information. The effect of the stimulus on stabilizing GDP has peaked. While it is true that only 30% of the funds have been spent, the remaining amounts are not directed toward pushing GDP upward. Rather, what's left to be spent was intended to work alongside recovered growth to keep it moving, but growth has not recovered to the point this works. It is teetering on an edge held up only by the effect of the stimulus to put it there.

After making his Willie Sutton comment, Bernanke then held off opining on taxes, disingenuously stating that this was a political matter and that he preferred to stay out of it. On the contrary, Mr. Bernanke has already put his foot deep into the political arena and in most damaging ways. Any comment he might make about taxes would have little to no effect in comparison to the poorly worded comment about entitlements or the indication that he has no intention of moving on jobs.

I have defended Bernanke in the past. Based on my knowledge of his academic record and his deep knowledge of depression era economics, I have felt he was the right man for this job. I still maintain the main criticisms we hear of him are overly hyped anger at circumstances that have no basis in reality as a criticism of his actions as an individual. Be that as it may, he has erred severely in his confirmation hearings, and he has shown that he seems not to have what is needed to further an economic recovery. I am deeply concerned about his testimony before Congress as it seems to indicate that what I still believe is a brilliant mind is resting in the head of an empty suit that has been torn off the rack and thrown about the shoulders of an inherently flawed politician who needs, for the good of us all, to find some other line of work.

[madrchsod]

1. according to the medicare new technology ...

is actually lowering costs of medical care. if people had full access to affordable health care the overall cost would go down. they are not being truthful with the facts about the cost of a medicare program for all.

but why would he...he have a vested interest to prop up the current system. a system that actually benefits the majority of the american people does`t concern him.

[RoyGBiv]

3. True enough ...

The problem though, or one of them, is that this dives into specific policy, which is not (supposed to be) Bernanke's area of influence. When the chairman of the Fed says things like this -- gets into specifics of legislative policy -- it has enormous influence.

It would be fine for him to say, for example, Medicare costs are a major source of our mid to long term deficit problem and must be controlled. The specific policies to achieve that are left in the hands of legislators, where they belong. But what Bernanke did was move in the direction of calling for cuts to benefits. He didn't go all the way there, but that's the way his metaphor leans.

And the metaphor itself was just bad. In my view, his use of it shows how out of touch he is with the reasons for the anger being directed toward him. He could be doing everything correctly, and his comments there would still be gawdawful. Again, I think some of the anger is misplaced, but the man is doing nothing to help himself here, and that too has consequences that hurt us.

The irony is the question about which he refused to offer an opinion -- taxes -- *is* an area where policy and the purview of the Fed intersect. Tax policy is certainly political, but it is also a major variable in everything the Fed does. He would be right to offer a carefully worded, controlled opinion.

However, he didn't. What he did do was parrot right-wing talking points about the stimulus and lean toward their position on Medicare and SS. One who has paid attention to Bernanke's career might be led to wonder if he didn't in fact have an opinion on taxes that was at variance with what the right-wing would like to hear, thus motivating him not to issue forth on that bit.

Really ... all-in-all, his testimony was just bad and points to a poor foundation of our economic policy from this point forward, assuming he is confirmed. (And I suspect he will be.)

[RKP5637]

2. So Correct, "(Bernanke) who needs, for the good of us all, to find some other line of work." n/t

[eridani]

4. Our long term deficit problem could not possibly be driven by useless military spending

Of course not. It's those old people and sick people--useless eaters all of us.