It’s the Uncertainty, Stupid
Big Ben Bernanke publicly acknowledges what so many of us have known for over two years.
July 25, 2010 - 12:00 am
The seasonally adjusted unemployment rate has been over 9% for fourteen consecutive months, and seems certain to break the record for the longest such string (18) since the government began reporting monthly results in 1948. On a population-adjusted basis, the actual number of housing starts in June (i.e., before seasonal adjustment) was the lowest on record for any June since such records have been kept — by over 50%. Foreclosures are on track to break another annual record. Factory output fell in June. Retail sales went negative during May and June. Federal tax collections are still plummeting; only remittances from the Fed are keeping year-over-year receipts from diving further. Do I really need to go on?
Getting back to Ben Bernanke, it’s important to remember that the Fed chairman has extensively studied the Great Depression and understands its monetary lessons. He agrees with the late Milton Friedman that serious Fed policy blunders added to its depth, telling the Nobel laureate in 2002: “You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
But there’s only so much Ben and the Fed can do. In Congressional testimony, Bernanke essentially admitted that he has done virtually all he can:
[E}ven as the Federal Reserve continues prudent planning for the ultimate withdrawal of extraordinary monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain.
That, friends, is a de facto admission of impotence.
Ben really can’t do anything about our atmosphere of “unusual uncertainty,” because he didn’t create it. Nancy Pelosi, Barack Obama, and Harry Reid did that just over two years ago by establishing what I have been calling the POR (Pelosi-Obama-Reid) economy ever since. It was in June of 2008 that these three demonstrated that they would act as ruthless redistributionist statists if they achieved monopoly power over the presidency and Congress. Their energy-starving environmental proposals, their near giddiness over the prospect of massive tax increases, and their fundamental hostility towards capitalism, free markets, wealth creation, and even the rule of law became all too apparent to those not wearing Beltway blinders. Entrepreneurs, investors, and businesspeople began pulling to the sidelines. Their expansion and hiring plans began to go on hold. They began stripping ongoing operations down to bare essentials.
The pullback by the productive accelerated two months later. The frauds by design known as Fannie Mae and Freddie Mac imploded, while Congress got stampeded into setting up the $750 billion slush fund we now know as TARP. Obama’s funny money-aided election convinced all but the snookered (I’m talking to you, Mort Zuckerman) that unacceptable uncertainty was about to become a permanent part of the economic landscape.
If you think the uncertainty is bad now, look at what’s coming. How many yet to be discovered daggers to personal and economic freedom lie in the thousands of pages of signed but largely unread legislation? How much more damage will be done when unelected, job security-conscious technocrats add tens of thousands of pages of regulations into the mix?
I don’t see how the uncertain business environment can improve as long as the current bunch is in charge. Ben Bernanke can’t make things better. Only voters can — maybe.