Monday, September 17, 2012

The GOP Attacks Fed Policies To Reduce Unemployment

The Fed announced another round of asset purchases to deal with the continuing high level of unemployment.  The Fed will purchase mortgage securities in order to keep mortgage interest rates low.  It recognizes that the overhang of debt from the housing bubble is one of the biggest drags on the economy.  Low interest rates will stimulate demand for housing and it will enable households with existing mortgages to refinance at lower rates. 

The Romney campaign, and its allies in the media, opposes any actions by government to stimulate the economy.  They have prevented Congress from using fiscal policy to deal with unemployment, so the only tool left to government is monetary policy.  Their rationale is similar to that used by conservatives to block government attempts to stimulate growth in the Great Depression.  They were wrong then and they are wrong today.  Ironically, since the Great Depression, Republican administrations have been the strongest users of policies to stimulate economic growth.  Both Reagan and Bush cut taxes and increased government spending to stimulate economic growth.  The Fed also assisted the Bush administration by cutting interest rates.  The GOP has the uncanny ability to sing different tunes depending upon which party is in office.  It is able to get away with this because its political base is tone deaf.

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