Bernanke Q & A Economic Session All About Republicans vs. Democrats

January 17, 2008 

The Facts 

Federal Reserve Chairman Ben Bernanke went before a Congressional committee today to answer some questions relative to what could be done to bolster the economy. The focus was supposed to be on short term solutions, but both sides seized upon the opportunity to also talk about long term fixes. Bernanke was absolutely admirable in reminding them that not only was he not going to be brought into their political differences, but also in steering them back to the point that this Q & A session was about short term fixes for the economy.  

My View 

I said that both sides seized upon the opportunity to talk about the long term fixes for the economy, but the Republican side was much more aggressive in that effort than were the Democrats, although Democrats were aggressive. Seven out of eight Republicans only wanted to talk about how tax cuts for corporations was the best avenue to follow, and each one of them desperately tried unsuccessfully to get Bernanke to agree with them. As they went along, each one would try to ask the same question by rewording it so that Bernanke would agree with them. One even tried to word the question in such a way that the only answer Bernanke could give was a “yes” answer, but Bernanke was just too smart for him. In each case, Bernanke told them that tax breaks was a long term fix at best, and based on past history, was questionable as to how much positive effect it would have on the economy. He had to continually bring them back to the fact that this session was about short term fixes.  

One Republican who admitted he was not an economist but rather a lawyer said that he was really there (at the meeting) to learn. But he did say that he had a hard time understanding how putting tax dollars back in someone’s pocket was a bad thing. This was in reference to the tax breaks for corporations. He even tried to argue with Bernanke. But another Republican did thank Bernanke for saying that tax cuts did not pay for themselves.  

A woman on the Democratic side did ask four very good questions, but they were designed to challenge the Republicans on how they wanted to proceed with stimulating the economy. The chairman of the committee shut her down on her questioning, and Bernanke was unable to answer her questions. I don’t know if this was partisan or not, as I did not notice which side of the isle the chairman of the committee is on. One of her questions that did not get answered was did Bernanke think the CEO’s who received these very high salaries and bonus’ should be required to give that money back if the company was a looser during his stay?  

After the issue of the tax cuts in 2001 and 2003 came up, one Democrat pointed out that the Office of Budget Management (OBM) has published reports that said those tax cuts did not help the economy. He then asks Bernanke if he agreed with the report. He did agree. Another Democrat suggested that we did not need another package that helped the rich get richer. He suggested a food stamp increase. Bernanke said that would certainly be a quick influx into spending. 

In trying to get Bernanke to agree that it was a good thing to make the current temporary tax cuts for corporations permanent, one Republican suggested that if a corporation knows that taxes are going up next year wouldn’t they be less influenced to invest? Bernanke again ignored this suggestion by pointing to what this session was all about, but I wanted him to compare that suggestion to the average person, which is, if taxes are going up next year why don’t I take advantage of the lower taxes now.  

Several Democrats kept talking about tax rebates. Bernanke said a blanket rebate for everyone would not be as effective as giving rebates to the low & marginal income. He said it was these people who would be more likely to go out and spend the money right away, which would have the fastest results. He went on to say he would hope they would spend it on a domestically manufactured item. Bernanke made it clear on several occasions that a rebate of this sort was the absolute quickest short term solution to stimulate the economy; if not a rebate, then something that would get the money out there quick. However, he did say that Congress should also find a way to pay for the rebate rather than “charge it”. One Democrat said unpaid tax cuts were not good, to which Bernanke strongly agreed.  

On several occasions Bernanke had to remind them that it was their responsibility on exactly what to do and how to do it, not his.  And in his pre-question comment, a Republican tried to blame the current high prices of oil and gasoline on the Democrats by comparing the prices of today with what they were at the beginning of the current Congress, which is Democratically controlled. Bernanke said nothing; he just smiled. One Republican did talk about our country’s debt and how we should be addressing that, and he was not tying this to partisan politics. Bernanke agreed with his comments completely.  

One Democrat suggested that when the discussions began on how to proceed with stimulating the economy that lobbyist be kept out of it. Bernanke strongly agreed. This same Democrat asked if the current housing market crises were in large part responsible for the current economic situation, to which Bernanke also agreed. One Republican tried to get Bernanke to agree that the housing problem was just as much the borrowers fault as the lender, but Bernanke would not agree with him. The final Republican to ask questions tried desperately to get Bernanke to agree that current laws and pending laws that were in favor of a borrower was bad for the lenders and the economy. As with several other attempts by committee members to trick Bernanke into agreeing with them, Bernanke immediately quoted the laws and/or issues they were referring to. You could see the surprise on their faces when Bernanke shoved his response in their faces.  

An observation; I was watching the Q & A session on CNBC. As the session went along the stock market continued to fall, as did the price of oil. The market started out about even, and by the time the session was over the Dow was down by about 175 points. Oil was slightly on the plus side at the beginning and was down by almost one dollar at the end of the session. On the current price of oil, Bernanke said that it was responsible for about one half of a percent on the economic drag.  

Ben Bernanke is a very smart and quick person. It was very obvious that he is well informed. It will be interesting to look back several years from now and see what his record is. He may or may not be playing politics behind the scene, but he sure isn’t playing politics out in the open. It is also obvious that the economic problem in our country is so huge that whatever is done for the short term will be less than a drop in the old preverbal bucket, and what is really needed to stimulate the economy is something we can not afford.  

You know, if the Republicans really want to get public support for giving big business, especially big oil, tax breaks, they should word a law as such; “you invest in a market that will increase jobs in your industry in this country, then we will give you an equivalent tax break”. But doing it the way the Republicans are currently doing it and want to continue doing it has already proven that the corporations take that tax break money and just put it in their own pocket and/or use it to export American jobs. In other words, both of you have already proven to us that it is nothing more than just a subsidy, so now you can’t be trusted up front. But you know what; the corporations know the politicians are just like them, they can’t be trusted either.

I found it ironic that as each committee member finished their questioning and heard Bernanke’s answers, they left. I’m sure each one of them would quote “another commitment” if they were asked why, but to me it was obvious that they were only interested in the answers to their questions and trying to get Bernanke to agree with their politics, not really interested in Bernanke’s complete observations on the current economic situation. Arrogant bastards!