Federal Reserve Chairman Ben Bernanke is urging Congress to focus on achieving long-run fiscal sustainability in the federal budget while avoiding action that could “impede the ongoing recovery.”
These two objectives are compatible, Bernanke assured the Joint Economic Committee in his testimony last Tuesday. He also advised fiscal policymakers to set two other objectives: promoting long-term growth and economic opportunity, and improving the process for making long-term budget decisions.
“In sum,” Bernanke told the committee, “the nation faces difficult and fundamental fiscal choices, which cannot be safely or responsibly postponed.”
Diane Lim Rogers, chief economist for The Concord Coalition, points to Bernanke’s testimony as further bolstering the argument that Washington can and should tackle both short- and long-term budget challenges. She notes in a recent blog post that Doug Elmendorf, director of the Congressional Budget Office, made a similar point in his testimony last month to the congressional “super committee” on deficit reduction.
The key, Rogers writes, is to “optimize our policies to get the best and most cost-effective results in terms of both short-term stimulus and longer-term growth.” The basic strategy, she says, would be to reduce deficit spending that has failed to effectively stimulate demand and to “either increase the ‘bang’ for the same amount of ‘buck,’ or achieve the same ‘bang’ for a lot less ‘buck’ — or anything in between.”