Fed Chair Bernanke: Congress, Get Your Foot Off The Brake!

The evidence is piling up more and more deeply that austerity (i.e., cutting spending) is the wrong policy for the situation we’re in.  The deficit and the debt are potential problems in the longer term, but what we are doing now is hurting growth, aggravating joblessness, increasing unnecessary suffering – and incidentally making it harder to address the longer-term issues.

Krugman and others have been making this argument for a long time now, and yesterday Federal Reserve Chair Ben Bernanke told Congress that the current focus is exactly wrong:

The expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year.

That is, “You’re standing on the brakes.  If you want the economy to go, then get off the brakes!”

And then guess what: The faster the economy grows, the fewer people are mired in joblessness, the less the government pays out in safety net support and the more it brings in in tax revenues.  That is, the deficit that they claim to be so concerned about shrinks.  It’s a virtuous cycle.

Of course, if it’s not really about the deficit at all, but really about the cuts they always want to make to social spending, …  Well, that would explain a lot.