DANA MILBANK: Congress drags down the economy

Washington Post Writers Group Published:

WASHINGTON -- It is tantalizing to wonder, as Ben Bernanke did last Wednesday afternoon, how much better the economy would be today, and how many millions more would have jobs, if Congress hadn't done so much over the past few years to drag down growth.

Bernanke was giving his last news conference as Fed chairman, and it became a wistful valedictory. The news was good, overall: The economy is improving enough that the central bank is tapering its intervention. But again and again, Bernanke returned to musing about what might have been.

"Given the billions of dollars that the Fed has put into the economy over the years," CBS' Wyatt Andrews said, "do you see a leading reason why the economy has not created more jobs?"

Bernanke saw several of the usual reasons: the nature of the financial crisis, the housing bust and trouble in Europe. But he added one more. "On the whole, except for in 2009, we've had very tight fiscal policy," he said. "People don't appreciate how tight fiscal policy has been." He noted that government employment is down 600,000 jobs from the trough of the recession, and after the previous recession, the government had added 400,000 jobs by this point.

After eight years at the Fed, Bernanke deserves more credit than any other person for saving us from another Great Depression. His arrival on the job -- after housing prices already were declining -- was providential: A specialist in depressions, he threw everything in the Fed's arsenal at the problem, and most of it worked.

But with Republicans winning back the House in 2010, budget cutting began prematurely, and the resulting austerity kept the economy from growing at a more rapid clip. On top of that, the constant brinkmanship roiled markets and sapped consumer confidence. Bernanke did all he could do to keep the economy afloat despite lawmakers' best efforts to tank it.

In a Fed conference room, he trotted onto the stage for a final time and seated himself at the carved wooden desk. Although he spoke with a Fed chairman's requisite restraint and blandness, he allowed himself a bit of celebration, noting that the unemployment rate, 7 percent, had been forecast to be near 8 percent before the Fed's latest round of purchases

But a dozen times he mentioned fiscal drag, fiscal head winds, tight fiscal policy and the like. In his opening statement, he noted that "despite significant fiscal head winds, the economy has been expanding at a moderate pace" and will pick up further, helped by "waning fiscal drag."

CNN's Annalyn Kurtz asked whether Bernanke thinks the Fed's asset purchases aren't getting "as much bang for your buck."

Bernanke argued that Fed efforts had brought down rates for mortgages, car loans and corporate bonds, and that "again, this has been done in the face of very tight, unusually tight fiscal policy for a recovery period." He singled out the "fiscal cliff deal, which created even more fiscal head winds for the economy."

Bernanke, who will be replaced by Janet Yellen next month, can feel good about what he did to fight the twin menaces of his tenure: the Great Recession and the lawmakers whose policies made it worse.

Follow Dana Milbank on Twitter, @Milbank.

(c) 2013, Washington Post Writers Group

Want to leave your comments?

Sign in or Register to comment.

  • How typically progressive and idiotic. Confiscation of hard earned pay to give to banks and unions and other cronies and then still spending more to increase the debt to now over $17 trillion but actually over $93 trillion with unfunded liabilities. Any private company would be prosecuted for what congress has done. Not us...we give them unlimited power and perks and allow jerks like soros to spread lies and hate rhetoric throught his 37 democrat publications.