The New Fed Program Is a Bailout for the Obama Economy
posted at 12:26 am on September 16, 2012 by Matt Vespa
The new Federal Reserve stimulus is nothing more than a bailout for the Obama economy. That’s the position Vice Presidential candidate Paul Ryan is taking to the airwaves. As The Hill reported today, “speaking at a campaign event in Oldsmar, Fla., Mitt Romney’s vice presidential candidate lambasted the Fed’s recent decision to try and do more to boost the economy as ‘sugar high economics.’ ‘We don’t need synthetic money creation. We need economic growth. We want wealth creation,’ he said. ‘We don’t want to print money. We want opportunity and growth.”
This latest foray to spur economic growth, which has been actively retarded by the Obama administration, includes a third round of “quantitative easing.” A program in which the Fed “buy[s] up $40 billion of bonds every month. But in a new move, the Fed said this time it would be continuing the purchases until it was satisfied with the rate of growth in the labor market — the past two rounds of easing were set at a specific volume of purchases. The Fed also said it expected to keep interest rates near zero until mid-2015 (it had previously predicted rates would stay low until the end of 2014), and that it was willing to do more if it found it necessary.”
However, this should program should be labeled as indefinite since the rate of growth will never be at a healthy rate with this administration adding billions in red tape per month. The Obama administration added $9.5 billion in red tape in July alone. In fact, according to Penny Star of CNS News, she reported on September 10 that:
Over the past three years, the bound edition of the Code of Federal Regulations has increased by 11,327 pages – a 7.4 percent increase from Jan. 1, 2009 to Dec. 31, 2011. In 2009, the increase in the number of pages was the most over the last decade – 3.4 percent or 5,359 pages.
Over the past decade, the federal government has issued almost 38,000 new final rules, according to the draft of the 2011 annual report to Congress on federal regulations by the Office of Management and Budget. That brought the total at the end of 2011 to 169,301 pages.
That is more than double the number of pages needed to publish the regulations back in 1975 when the bound edition consisted of 71,244 pages.
The figures were released on Monday at the U.S. Chamber of Commerce in Washington, D.C., when the business federation held its annual Labor Day briefing on the state of the economy, obstacles to job creation and the burden of regulations on the labor market.
Seventy percent of the regulations were economic, accounting for $1.236 trillion of the annual cost. The other regulations were, in order of cost, environment regulations ($281 billion), tax compliance ($160 billion) and occupational safety and health and homeland security ($75 billion).
Talk about a way to inject vigor into our anemic economy. Furthermore, it should be noted that more federal action to “stimulate” our economy threatens our credit score – which was downgraded again last week.
Leah Barkoukis of Townhall wrote yesterday that “the ratings agency Egan-Jones on Friday gave the U.S. a credit rating of AA-, down from its solid AA rating. Michael Aneiro at Barron’s notes that the downgrade comes three days after Egan-Jones ‘affirmed its AA rating for the U.S. but warned that further Fed stimulus could trigger a downgrade.”
T]he FED’s QE3 will stoke the stock market and commodity prices, but in our opinion will hurt the US economy and, by extension, credit quality. Issuing additional currency and depressing interest rates via the purchasing of MBS does little to raise the real GDP of the US, but does reduce the value of the dollar (because of the increase in money supply), and in turn increase the cost of commodities (see the recent rise in the prices of energy, gold, and other commodities). The increased cost of commodities will pressure profitability of businesses, and increase the costs of consumers thereby reducing consumer purchasing power. Hence, in our opinion QE3 will be detrimental to credit quality for the US…. From 2006 to present, the US’s debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%. In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%.
The new Fed program is bad for our economic health. It’s also a crass attempt to ease the economic pain caused by President Obama’s impotent economic policies. As George Will noted on Charlie Rose in August of 2011, Obama came into power in what was to be the apotheosis of American liberalism. Now, Will says, the conversation in D.C. is more conservative than it was in “Reagan’s heyday.” Furthermore, Will and others within the conservative movement know that this country and its people like a government that promulgates economic policies that are light in taxes and light on regulation. Despite what the left wing may think, the Bush Tax Cuts spurred 50 months of uninterrupted economic growth and created 8 million jobs.
As such, Bernanke is wrong. What is needed to revive our economic situation is not a new federal stimulus program, but new management in the White House. We’ve has unemployment above 8% for over forty consecutive months. Twenty-six of those months it was over nine percent. We have $5 trillion in new debt, the lowest labor participation rate in 31 years, and another $1 trillion dollar budget deficit for the fourth year in a row. With these economic indicators, it’s empirical evidence that shows “the sterility of the government trying to create jobs” and boost economic growth. President Obama needs to stop peddling “the same policies that got us into this mess in the first place.”