Wednesday, August 6, 2014

Thank Goodness For The Federal Reserve

A liberal Republican wrote the title for this post.  He never thought that he would have ever uttered it. In this article he contrasts the aggressive effort by the Fed to prevent a potential depression.  He does not agree with all of the Fed's policies but at least they did something in response to a crisis.  On the other hand,  Congress was missing in action.  Instead of responding to the crisis in a positive fashion, Congress made the recession worse.  The blame for the congressional failure falls primarily on the Republicans.  The Democrats might have responded too weakly, but the Republicans did the opposite of what they did during the previous recession under George Bush.  Instead of using fiscal policy to stimulate the economy, as they did when Bush was in office,  they used fiscal policy to contract the economy.  This is apparent when one looks at public spending during the recession.  The decline in public spending has been the major source of lower GDP. 

Perhaps it was wrong to argue that the Fed was aggressive in response to the recession and that Congress was not.  Congress was certainly aggressive in making the recession worse.

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