Congressman Randy Neugebauer (Republican, Texas) has questioned the Fed’s decision to target higher inflation and says there’s no way we know it will work.
“We’ve tried to spend and borrow our way into prosperity…now we’re being told to print,” he said.
Neugebauer doesn’t think Fed Chairman Ben Bernanke and the FOMC should be targeting higher prices for assets.
“The Fed is almost in the price control business,” he said, noting that’s what he thought markets were supposed to do.
The concern for Neugebauer is that inflation might hit commodity prices, and not wages, raising the cost things like food for consumers. He’s also worried continued low interest rates are hitting seniors and pensioners who rely on the interest growth from their savings for spending.
And all of this action from the Fed might have no positive impact at all, according to Neugebauer. He fears that businesses and individuals are too concerned about paying down debt and cutting costs to take on new loans and spend, no matter how cheap they are.
Economists like Richard Koo have expressed similar concerns, saying the U.S. economy is in a “balance sheet recession” where individuals and businesses are too preoccupied with paying down debt to spend.
Neugebauer also questioned any sort of government fiscal spending to get us out of this mess.
“People are looking for all kinds of excuses to spend money…we don’t have the money,” he said, referring to infrastructure and other government spending. Neugebauer was encouraged by New Jersey Governor Chris Christie’s decision to cancel the construction of a new tunnel to New York, due to unknown future costs for the project.
Neugebauer would prefer the next Congress focus on “tax stability,” including the extension of the Bush tax cuts permanently. He says this will provide the sort of environment where businesses can plan and make decisions on future spending.