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Federal Reserve, Government, Politics, Polls, Unemployment, United States

Ben Bernanke Gets Political

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┬áthat 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.


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3 thoughts on “Ben Bernanke Gets Political

  1. The reason we have the tax cuts in the first place is because corporations. Now with new laws they are aloud to give as much money as they want to a particular candidate in an elections, which pretty much means they are gaining control of the government. We need to get the corporations out before we can clearly decide what is more important in this debate, because as it stands now the Senate will always be willing to through more money into the economy.

    Posted by Chris Teske | February 8, 2012, 7:15 PM
    • Generally, I agree. We need to minimize the effect corporations have on our government, though I do believe that they should have the right to advocate for themselves through lobbyists. I also think that corporations should have a limit on how much they can donate and should not “get a vote”, as it’s been called.

      I do think that the Bush tax cuts should stay for the moment, though. Getting rid of them would damage our economy at a time when I don’t think we can afford that.

      Posted by zachdh | February 8, 2012, 8:59 PM
      • “Commercial space is very cheap today, whether raitel, office or industrial. Leases don’t turn over every year, but they do on a rolling level, and sometimes tenants re-negotiate leases mid-contract to get better terms.”most commercial leases are 5-7 years. sure, you can get a great lease right now, but that’s precisely because nobody wants one.i look at the financial of dozens of companies a week. i have yet to see one get a meaningful operating profit boost from a better lease in this downturn.landlords do not renegotiate leases when prices are below the contract rate and demand is sparse.you are now changing your story and saying that increased production yields lower unit costs, which is true to a point (though flips over again if you run into the need to do things like pay overtime).your original claim was that demand increases led to deflation, which is clearly untrue.when was the last demand driven price inflation we saw? did you miss the housing bubble?how about current prices for all manner of commodities? how about organic foods? supply there is going up, but not nearly as fast as demand so prices are way up.there are hundreds of examples.the ISM index just showed a price rise that annualized to over 6%. january nominal raitel sales were driven entirely by inflation, annualizing at nearly 4% and rising rapidly.imported oil prices were up 31% last year.PPI was up 0.8 in jan after being up 0.9, 0.7, 0.6 in dec, nov, sept respectively. that’s over 3% inflation in 4 months annualizing to 12.7%.you are simply choosing to ignore them because you want to believe the BLS is right in the face of overwhelming methodological and unadjusted price data.

        Posted by Gorengan | November 13, 2013, 3:46 AM

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