Bernanke offers nothing spectacular

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The following editorial appeared in the Milwaukee Journal Sentinel on April 28:

Now that Big Ben has chimed in at his first-ever news conference, what did we learn?

Not much — not, that is, if you were hoping he would make news or at least an errant remark.

Federal Reserve Chairman Ben Bernanke was poised, articulate and thoughtful in the first news conference ever called by a Fed chairman. His briefing was an Econ 101 class for the nation.

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Before the briefing began, the Fed announced that its $600 billion program to buy Treasury securities — known as qualitative easing, or QE2 — would end as planned in June. Economists have given the program mixed reviews. While Fed action has kept interest rates low, pumped up the stock market, reduced the cost of American exports and allowed companies to borrow at low rates, most Americans didn’t get any more wind in their sails as a result. Unemployment stood at 8.8 percent in March.

Many companies continue to sit on big piles of cash and aren’t willing to invest or hire. Until more of those businesses see enough demand to justify hiring, the economy will remain sluggish.

“It’s good for stopping the fall, but for actually turning things around and driving the recovery, I just don’t think monetary policy has that power,” Mark Thoma, a professor of economics at the University of Oregon, told The New York Times recently. On Wednesday, Bernanke said QE2 was not a “panacea” and was never intended to be one.

The question now is whether the Fed should do more about stubbornly high unemployment. Bernanke seemed to be saying Wednesday that it won’t — or can’t — especially as signs of inflation reappear in the economy.

Bernanke did express deep concerns over the number of long-term unemployed — about 45 percent of those unemployed have been out of a job for six months or more. But he indicated that monetary policy couldn’t do much for that group. That’s unfortunate because the nation’s extended bout with high unemployment is costly — lost homes, lost savings, struggling local governments. But Bernanke is right. There is little the Fed can do.

Congress, though, could do more.

It could invest in retraining programs, unemployment benefits and research that spurs innovation and job growth. And it could avoid making things worse by cutting too deep too fast and focusing too much on short-term solutions.

Bernanke warned Wednesday of the need to address the long-term fiscal crisis facing the country. We agree. But the demands for short-term budget cutting from Republicans in Congress — even to the point of threatening not to raise the nation’s debt ceiling — is reckless. Waste should be cut. Some jobs should be, too. But the biggest problem facing the country is unsustainable entitlement spending for Medicare, Medicaid and Social Security. Everything else is small potatoes. Cutting too deep too fast could harm the economy.

For the average viewer, Bernanke’s news conference was about as interesting as watching paint dry. But even so, it was worthwhile. As Bernanke noted, just a few years ago, the Fed didn’t even announce when it had changed interest rates. Bernanke’s decision to hold quarterly news conferences is a welcome step toward a more transparent central bank.

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