Wednesday, June 08, 2011

More Bad Economic News

First, is this Post piece on Treasury Secretary, Tim Geitner. According to the Post, Geitner has been among the leading Obama advisors who want to prioritize deficit reduction over further stimulus.

A couple of interesting tidbits from this article, though, are that (1) Larry Effin Summers was one of Obama's "job recovery first" advisors; that (2) at least Geitner thinks deficit reduction should involve tax increases; and that (3) the government needs enough money to do its job:

Republicans were pushing for an extension of tax cuts for the wealthy enacted during George W. Bush’s presidency. It was administration policy to oppose extending them, but neither White House advisers nor congressional Democrats, facing tough midterm elections, wanted to engage in a tax fight.

Geithner, however, believed the tax cuts were a waste of money at a time of growing deficits and began giving speeches about the importance of letting them expire

Naturally, Republicans who want debt/deficit reduction through tax cuts, don't much like Geitner's plan or views:

“After meeting with both President Obama and Treasury Secretary Geithner this week, I and my colleagues are not confident that the Administration has a credible plan to reduce our debt, so it’s time to demand one,” freshman Rep. Diane Black (R-Teabag) said in a statement. “Clearly a package of significant spending cuts and structural reforms are necessary.”

But since the Obama Administration seems to neither have the interest of doing more stimulus, or of persuading the public of the need to do more stimulus, this article wasn't especially suprising.

I actually found the NYT write-up of Fed Chairman Bernanke's recent comments more discouraging:

The leaders of the Federal Reserve are talking like people ready to sit down and let others take the lead in addressing the nation’s economic problems.

“Monetary policy cannot be a panacea,” the Fed’s chairman, Ben S. Bernanke, told an audience of bankers Tuesday in Atlanta.

He said that growth remained slow and uneven, but he made no mention of the possibility that the Fed would intervene, noting instead that “a healthy economic future” required a plan to shrink the federal deficit.

William C. Dudley, one of Mr. Bernanke’s top lieutenants, expanded on the same theme Tuesday night, saying that the government needed to balance its books, and that the nation needed to reduce its dependence on borrowing and consumption.

“These are fundamentally structural issues — not cyclical issues; they cannot be tackled primarily through monetary policy,” Mr. Dudley, the president of the Federal Reserve Bank of New York, said in a speech at a Midtown Manhattan hotel. “Instead, monetary policy is mainly a tool for stabilizing the macroeconomy and keeping inflation expectations well anchored.”


Mr. Bernanke made clear that recent data had shaken his confidence in the strength of the recovery, which continues to depend on extensive federal support. Mr. Bernanke has said he wants to see evidence of strong and sustained hiring by private firms before deciding that the economy can withstand the loss of that support. On Tuesday, he said that “until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”

The economy has expanded much more slowly this year than the Fed had predicted. Last month private employers added only 83,000 jobs, reducing the average so far this year to about 180,000 jobs a month — barely enough to cut into the numbers of the jobless.

Mr. Bernanke noted that after two years of economic recovery, the net decline in one important measure, aggregate hours worked, remained greater than the peak decline in the same measure during the deep recession in 1981-82.

So, Bernanke doesn't think any more Fed action would matter, deficit reduction should be the goal, and oh yeah, even though the Fed's more optimistic economic projections haven't come true, the Fed still thinks things are basically OK and improving and will do better. We're sure this time. Meanwhile, William Dudley, one of Bernanke's Fed deputies, repeats teabag economics in saying the Fed should basically only execute one of its fundamental duties (fight inflation) while ignoring the other (promoting full employment).