Following a startling announcement of China’s first benchmark lending cuts in four years, the Joint Economic Committee sat down with Federal Reserve Chairman, Ben Bernanke, this morning to talk economics.
With members throwing words like “quagmire” and “stall-speed” around to describe the U.S. economic recovery, Bernanke maintained his usual tight-lipped composure about endorsing specific legislative programs. However, when Sen. Jim DeMint (R- S.C.) accused him of luring everyone into a “false sense of security”, it was difficult for Bernanke not to defend himself.
The specific problem that DeMint was addressing was the fact that although debt has increased sharply since 2008, interest rates have remained at 2 percent. Noting that increased interest rates would have resulted in trillions of dollars over time, DeMint asserted that the lack of Congressional action was a direct result of the “catch-22” that Bernanke had found himself “caught in” by keeping interest rates stable.
“The reason to keep rates low isn’t to accommodate Congressional fiscal policy,” Bernanke responded. Through consumer benefits like cheapening mortgages and lowering spreads, lower interest rates help to stimulate the economy. Laughing for the first and one of the only times during the meeting, Bernanke noted that because budget deficit is already so large, Congress should already have the incentive to fix it regardless of interest rates and their potential benefit of “a trillion here, a trillion there.”
The cross-examination of Bernanke didn’t stop there, however. Caught between the continuous battle ground of Keynes vs. Hayek philosophies, the Federal Reserve chairman found himself in the midst of the committees’ various concerns about foreign economies, too big to fail, quantitative easing, and even the Occupy chants.
Answering Sen. Bernie Sanders’ (D- Vt.) long-winded question about the “unequal distribution” of wealth in the U.S., Bernanke responded: “it’s not so much a question about bringing down the 1 percent, but bringing up the middle class.”
Beyond the occupiers on our streets, Bernanke also had a message for the committee about the economy outside of U.S. boundaries. With an optimistic outlook on China’s lending announcement, Bernanke said that their economy is nothing that we need to worry about.
Despite their nearly three-year low of 8.1 percent in gross domestic product in the first quarter, Bernanke admitted, “they still have rates of growth that we’d love to share.” However, with an apparent attempt to lessen the worries of the committee, he said, “When China slows, oil goes down which works well for us.”
With a fiscal cliff fast approaching and lack of economic stability in our own country, some members worried how much we could actually help foreign countries with their debt crises. “The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely,” Bernanke told them. “As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.”
With all of these concerns piling up, Senator Dan Coats (R- Ind.) had a final question that he needed to ask.
“Do you sleep well at night?” Coats asked.
“Do I sleep…?” Bernanke responded, apparently confused by such a simple question.
“Do you sleep well at night?” Coats repeated.
“…I have a lot to do during the day and I need to be well-rested,” Bernanke said.
Sleep while you can, Bernanke. Sleep while you can.
This post was authored by Justice Gilpin-Green, a Townhall.com editorial intern.