Mar 01 2011
Johnson and Bernanke Discuss Jobs and Fiscal Responsibility at Hearing
Today Senate Banking Committee Chairman Tim Johnson (D-SD) held a hearing on the Federal Reserve Bank’s Semiannual Monetary Policy Report. The Committee heard from Federal Reserve Chairman Ben Bernanke, and discussed the state of the economic recovery.
“It is clear that the Fed is taking aggressive action to help put people back to work and stabilize the overall economy,” said Chairman Johnson following today’s hearing. “We should be using every tool in the toolbox to create jobs and spur growth. Congress and the Fed have taken steps to encourage growth, including measures to increase small business lending and provide needed certainty and protections in the financial system. There is certainly more we in Congress can and must do to ensure our economy is on solid ground.”
Mindful of South Dakota families who continue to feel the effects of these tough economic times and the need to create more jobs, Chairman Johnson questioned Chairman Bernanke on what actions the Fed is taking to boost the economy. Chairman Johnson also reiterated his stance against continued deficit spending, noting that the nation needs to find pro-growth policies even as we decrease overall spending.
This is the second time this year that Chairman Bernanke has testified before the Senate Banking Committee. Chairman Johnson will continue to work closely with the Federal Reserve and other financial regulators to encourage economic growth and job creation.
The following are excerpts from this morning’s hearing:
JOHNSON: Mr. Chairman, has the bipartisan tax cuts enacted last
December been a boost to economic growth? And to what extent does it
complement the Fed's QE2 (quantitative easing) program short term?
BERNANKE: Yes, Mr. Chairman, everything else equal, the
additional tax cuts, including the payroll tax cut and the business
expensing provisions, should add to aggregate demand and contribute
somewhat to growth in 2011 and in 2012.
I should say that -- and so in that respect it's complementary to
the Fed's monetary policy actions.
I should say that in our projections and forecasts we try to make
an assessment of what we think is most likely in terms of fiscal
policy. And we had anticipated, as of November, for example, that
many of these provisions, including the U.I. (unemployment insurance)
and most of the tax cuts, would be extended. And so we had taken
that into account in our analysis.
That being said, there was some additional stimulus coming from
the payroll tax cut, for example, which we had not anticipated when we
-- when we were looking at our forecast in November.
JOHNSON: What is your perspective on how we can promote long-
term growth in light of the need to reduce the size of the deficit?
Are there particular policies or government investments that will
promote U.S. economic growth and our international competitiveness
over the long term even as we work to reduce spending overall?
BERNANKE: Mr. Chairman, I spoke about this a bit in the
testimony before the Senate Budget Committee.
The fiscal situation is very challenging, so on the one hand,
it's clearly important, and indeed a positive thing for growth to
achieve long-term fiscal sustainability. That will help keep interest
rates down, that will increase confidence, that will mean that future
taxes will be lower than they otherwise would be, and that will be
beneficial for growth.
At the same time, to the extent possible, I hope that Congress
will not just look at the inflow and outgo, but will also think about
the composition of spending and the structure of the tax code.
On the tax side, I think there's a good bit that could be done to
make the tax code more efficient and -- and also more fair and less
difficult to comply with.
On the spending side, I think attention should be paid to
important areas like research and development, education,
infrastructure, and other things that help the economy grow and
provide a framework through -- you know, that allows the private
sector to bring the economy forward.
So it's a double challenge. On the one hand, the need to control
longer-term spending; on the other hand, not to lose sight of the
importance of making sure that the money that is spent is spent
effectively and with attention to long-term growth.
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