Enter the Federal Reserve Bank, which in addition to keeping interest rates artificially low has been printing trillions of dollars over the last three years in an effort to prop up America’s faltering economy. Some economists are now speculating that the Fed may extend this “quantitative easing” policy to cover the purchase of state debt and municipal bonds – an unprecedented move that would only delay the inevitable fiscal reckoning.
“Given the difficulties faced by state and local governments, this may well be the route they choose, at least for some of the quantitative easing,” Dartmouth professor David Branchflower wrote recently.
Such a decision would have far-reaching ramifications for taxpayers. Most notably, it would create a mountain of new state and local debt – permitting these governmental entities to continuing spending in the same “consequence-free” environment while adding tremendous explosive power to a ticking fiscal time bomb.
And while the Fed is technically precluded from purchasing longer-maturity municipal bonds, Bernanke could invoke “emergency powers” at the secretive central bank to authorize these purchases – much like the Fed used its emergency powers to dole out $3.3 trillion in loans during the recession.
This is exact opposite of what our current economic situation calls for.
Rather than identifying clear examples of unnecessary spending – to say nothing of fundamentally redefining and reducing the role of government at all levels – our leaders are looking for ways to keep the “high times” rolling. With the walls already closing in after a decade of excess, we cannot permit them to continue ignoring reality at the expense of future generations of taxpayers.
