In recent days, Ben Bernanke has gotten surprisingly political. In a Senate Budget Committee hearing, Bernanke stated that lawmakers must act fast and renew the Bush tax cuts. He argues that all the uncertainty will hold back markets and will keep businesses from making long term decisions, causing economic growth to stall. As he has been very often recently, he is right. The uncertainty will make it difficult to to make longer term decisions such as hires, large long term capital investments, etc. These activities are obviously very good for the economy, and Obama and the Republicans have been trumpeting their support for them in their stump speeches. However, there is a general consensus among analysts that the government will not address these cuts until after the elections. This may be the safe move politically, but it is somewhat senseless as well. Continuing the Bush tax cuts could be a boon for Democrats and Obama, who often are accused of being anti-business. It would also increase business’s expectations of what will happen to their costs, freeing them to make more of these long term decisions that we’ve talked about. Obviously, extending the Bush tax cuts is not the most fiscally responsible thing the government can do right now, but fixing the deficit should be secondary to fixing the economy, and it is very hard to do both at the same time. Extending the Bush tax cuts for at least another year or two will be a boon to the US economy while avoiding too much fiscal damage.