Tags: richard | fisher | fed | Deficit | Suffer | us | economy

Fed’s Fisher: Cut Deficit Now or We Suffer

Thursday, 10 Mar 2011 09:00 AM

Congress has to get its act together and cut the deficit now or face a long-term, permanent drain on America’s economic future, warns Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas.

Widely regarded as an inflation hawk, Fisher said he would vote against any extension of the massive second round of quantitative easing by the U.S. central bank. He made his remarks to an audience of bankers in a recent speech in Washington. The Fed has introduced roughly $2 trillion to the money supply since the crisis began.

“The long and short of it all was that the medicine applied by the Federal Reserve worked. Whereas, then there was no liquidity to finance our economy, now there is plenty: Money is cheap; banks and credit markets are flush; the stock market has soared,” Fisher said.

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 Richard Fisher
“I do not feel that further monetary accommodation will speed the process. It might well retard job creation, should it give rise to inflationary expectations,” he said.

In fact, he might vote to end it early, if necessary. “I will vote to curtail or perhaps discontinue it. As I said, the liquidity tanks are full, if not brimming over. The Fed has done its job,” he said.

Fisher argued that the Fed did its job in the crisis and saved America from ruin. He called on business owners to use the cheap credit supplied by the Fed to hire American works and to build back the roughly 7 million jobs vaporized in the Great Recession.

“What is needed now is for business to be incentivized to commit that liquidity to creating American jobs. This is the task of the fiscal authorities, not the Federal Reserve,” he said.

He warned against running a large deficit for too long. The White House projects federals spending alone, not counting state and local debts, to exceed $1.65 trillion in fiscal 2011.

“As far as the eyes of the analysts at the Office of Management and Budget can see, deficits will remain slightly above the 3 percent GDP threshold at which it is feared significant crowding-out of private sector economic activity begins to appear,” Fisher warned.

He also called out Congress for failing to take seriously the structural deficits it will pass on to future generations unless dramatic spending cuts are taken soon.

“Instead of passing the torch of prosperity to the successor generation, the fiscal authorities have been passing them the bills. If our Congress continues to provide more in services than they are willing to collect in taxes, it is a mathematical certainty that the well-being of our progeny will suffer,” Fisher said.

“Correcting this pernicious dynamic is imperative for assuring our economic future.”

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Congress has to get its act together and cut the deficit now or face a long-term, permanent drain on America s economic future, warns Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas. Widely regarded as an inflation hawk, Fisher said he would vote...
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2011-00-10
Thursday, 10 Mar 2011 09:00 AM
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