Updated May 13, 2019 10:03:07 We need to be realistic about the fiscal consequences of the President’s debt plan and, crucially, we need to make it clear to the country that we’re serious about that, according to the chairman of the Federal Reserve.
In an interview with the Wall Street Journal, Fed Chair Jerome Powell made clear the Fed’s preference for a long-term fiscal policy over short-term monetary stimulus to get America back on track.
Powell said he believes that a long term policy would help spur the economy and avoid the type of deep recession that the US experienced in the 1930s.
He also pointed to a recent study showing that debt deflation would reduce the cost of the country’s economic activity by as much as 3 percent over a decade.
We’re in a different situation today, and we’re in an environment that is going to require a lot of flexibility and a lot more fiscal stimulus, Powell said.
If we do the right thing and use fiscal policy as the lever to help us achieve those goals, we can achieve the long-run goals of growth and job creation, he added.
But it’s unclear what that fiscal policy will look like, since the President hasn’t released a detailed budget.
“It’s very hard to tell how this [economic] strategy is going, given the lack of specifics and the fact that it is a very new strategy,” Powell said, according the Journal.
The White House has repeatedly denied that it’s planning a budget, telling reporters it’s working with Congress to come up with a plan.
But Powell told the Journal that there’s “a lot of room for us to be more flexible” in coming up with fiscal plans.
He also told the paper that he’s not “surprised” that Republicans have been so focused on raising taxes on the middle class.
The Republican-controlled House of Representatives passed a bill Thursday that would raise the debt ceiling, with President Donald Trump calling it “an economic suicide pact” that “we will not survive.”