the only game in town

Cautious on Growth, Bernanke Offers No Hint of New Action

In a rather eerie echo of my previous post there are some very telling reactions to Fed Chairman, Ben Bernanke's recent appearance before the Senate Banking committee as reported in the New York Times. The issue, of course, is government stimulation of an economy in the doldrums—to do or not to do it.

Mr. Bernanke, playing it coy, talks of a looming “fiscal cliff”. “The combination of higher taxes and cuts in federal spending set for the end of the year 'would probably knock the economy back into a recession and cost a lot of jobs',” Mr. Bernanke said. This, it seems to me, is a rather off handed way of saying, as Richard Duncan suggests, that the economy is, in fact, on government life support. 

As you would expect the senators reactions are purely party line. One example each:

Republicans pressed Mr. Bernanke to forswear additional action, warning that new measures would eventually lead to higher inflation and suggesting that the Fed’s policies were allowing Congress to delay a reckoning with the federal debt. Mr. Bernanke rejected both arguments.

Democrats put countervailing pressure on Mr. Bernanke to agree that he should do more. “I’m afraid the Fed is the only game in town,” said Senator Charles E. Schumer, Democrat of New York. “And I would urge you to take whatever actions you think would be appropriate.”

Does that sound like government life support or what?