Fed Chairman Bernanke faced his second round of Capitol Hill questioning today on monetary policy, this time from the House of Representatives.Rep. Michele Bachmann used her time to question the logic of the Fed’s huge balance sheet by comparing the government’s debt situation to her daughter’s spending habits.
Here’s the transcript:
BACHMANN: So the Fed wouldn’t need to be buying all these treasuries then. We could find other buyers of our debt. Is that true?
BACHMANN: So then why are we doing it?
BERNANKE: To keep rates a little bit lower, to help support housing, automobiles, and other parts of the economy that need support.
BACHMANN: But if there are other buyers, why the FED?
BERNANKE: To get rates a little bit lower.
BACHMANN: So if my 18-year-old daughter was spending 40 per cent more than what my husband and I were giving her, and she didn’t just do it this month but she did it the next month and the next month and the next month — and finally my husband and I said, ‘We’re just not going to bail you out anymore, we’re not going to continue to finance that overspending that you’re doing,’ and she said to me, ‘Mother, we need to align our solution with the problem,’ — in other words, you need to keep giving me that money because it’s really not a problem yet — I would say, I think you have a problem today.
And the reason why I would say that is because the analogy with the federal government, in January of 2007, our debt was 8.67 trillion. That debt today is closer to 16.5 trillion with the intra-government debt, according to your calculation.
Do you think that’s a problem, that in six years, we’ve gone from 8.67 trillion to 16.5 trillion?
BERNANKE: Certainly I think it’s a problem, and I think it’s important we have measures to bring down it down over time.
BACHMANN: But you said we need to align the solution with the problem. It seems to me we have a big problem. and I’ll tell you why. When I was home this last week and talking to a lot of women, they were telling me, ‘I don’t get this — gasoline at Christmastime was $2.99 a gallon, now it’s $4 a gallon.’ They say, ‘I can’t keep up with the price increases at the grocery store. And we just got our health insurance premium and its going to be $300-a-month more than what it was.’
And so all I want to say Mr. Chairman is that what I’m hearing from people is that they are having to deal with the inflationary pressure.
Bachmann’s question about the debt implies that she thinks Ben Bernanke controls how much the government taxes and spends, when, in fact, Congress controls it.
Her statement about inflation, meanwhile, may be the first time we’ve heard someone blame the spiraling cost of health care on loose monetary policy.
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