Former Fed chief Ben Bernanke was taking jabs at President Donald Trump’s economic stimulus and tax cuts on Thursday in DC to a like-minded leftist crowd.
Bernanke, whose monetary policies helped every institution in the US except the US consumer, says the stimulus will only have a short-term effect and that by 2020 it will peter out.
The former Fed chair sounding quite jealous since he begged the White House and Congress for this type of economic plan for most of his term as Fed chief to help pull the US out of the Great Recession.
Bernanke using the cartoon character Wiley E Coyote to say the US economy will go off a cliff in 2020. This happens to coincide with Trump’s re-election campaign.
Bernanke — citing the amount of stimulus coming from the White House of $1.5 trillion in personal and corporate tax cuts and a $300 billion increase in federal spending — saying these policies “make the Fed’s job more difficult all around” because it’s coming at a time of very low U.S. unemployment.”
While the unemployment rate is 3.8%, the number really does not take into account people working part-time and wish to have a full-time job. It also does not count the people who longer collect benefits.
So to say the US is at full employment is disingenuous at best, since Bernanke knows he is citing flawed data to take a shot at the Trump White House.
I find it ironic Bernanke would use the Wiley E Coyote imagery since no matter what he did as Fed chief both he and President Obama resided over the first modern 8-year term that did not achieve a 3% annual GDP growth. So to suggest that Trump’s economic policies are basically futile and will fall off the cliff is very rich.
What will the Obama Administration do to ensure a Clinton win?
Well first the White House needs to guarantee we do not fall into a recession. The numbers are razor-thin for Q1. A 0.5% growth number, which will be revised at the end of this month could fall into negative territory, since some of the numbers they guessed at for the first reading are start coming in not as rosy as once thought.
Business inventories and commitments to orders can be fudged on first blush, but when the actual data comes in, we could be in a contraction (which is a $10 way of saying negative growth).
So look for comments from the administration on stimulus or tax cuts. Another way of saying this is “helicopter money” given directly to the people and bypassing the banks, unlike QE.
Vote buying could be another name for it.
Anyway this stimulus rhetoric will be ramped up as we get closer to the end of the month. The reason is two-fold:
It takes time for this money to work its way into Q2 readings. Since this “gift” needs to have an effect before the end of June and it has to be spent on new items.
The tax break or stimulus needs to be significant because just paying off credit card balances doesn’t help GDP, so the cash-back plan from Uncle Sam has to be large enough to make people feel flush and spend it.
This is what the early summer leading up to the conventions will be like. Obama saving his legacy and trying to pass it along to Hillary using helicopter money.
No two-ways about it. If you are planning to make a large purchase ie appliance, car or home, wait a bit. “Attractive financing terms will be available,” as the hucksters on TV say.