For a future discussion of monetary policy, mostly in Govt 2305 and 2302. While the Congress has stalemated, the Federal Reserve still has the ability to impact the economy:
The Federal Reserve chairman, Ben S. Bernanke, delivered a detailed and forceful argument on Friday for new steps to stimulate the economy, reinforcing earlier indications that the Fed is on the verge of action.
Calling the persistently high rate of unemployment a “grave concern,” language that several experts described as unusually strong, Mr. Bernanke made clear that a recent run of tepid rather than terrible economic data had not altered the Fed’s will to act, because the pace of growth remained too slow to reduce the number of people who lack jobs.
Bernacke did so despite opposition from Congressional Republicans:
. . . Mr. Bernanke appeared to defy political pressure from Republicans to refrain from new measures. Mitt Romney, the Republican presidential nominee, has said such action would be counterproductive, and has pledged to replace Mr. Bernanke at the earliest opportunity.
“Policies from Congress, not more short-term stimulus from the Fed, are the ingredients necessary for restoring growth in the American economy,” Senator Bob Corker, Republican of Tennessee, said in a statement after Mr. Bernanke’s speech.
On the other hand, Democrats welcomed Mr. Bernanke’s remarks. There is little prospect that Fed action will lift the economy before the election, but party officials fear the opposite possibility — that inaction could undermine economic confidence — and so they greeted the speech with relief.
Senator Charles E. Schumer, Democrat of New York, said Mr. Bernanke “should not let any political backlash deter him from following through and doing the right thing.”
We will spend time in upcoming classes looking at the specific steps he proposes, but for now its useful to note the differences in these two branches. The legislative branch is geared towards inaction, while the executive branch is designed to act.
