James Pethokoukis

Politics and policy from inside Washington

Bernanke’s strange comments on U.S. deficits

April 8, 2010

Cato’s Mike Cannon thinks Ben Bernanke’s comments on budget deficits should have come weeks ago. And he thinks he knows why they did not (excerpts):

If Bernanke really wanted to warn the American public about the dangers of rising budget deficits, then a congressional debate over creating two new entitlement programs would be the most important time to deliver that message.  … Had Bernanke delivered his populist warning before January 28, it could have jeopardized his confirmation by the Senate to a second term as Fed chairman. Had he done so between January 28 and March 21, he would have suffered a storm of criticism from Democrats (and possible retribution when his term came up for renewal in 2013) because his sensible, responsible warning would have made moderate House Democrats more skeptical about ObamaCare’s new entitlements.

Bernanke’s behavior thus reveals why ObamaCare’s cost would exceed projections and would increase the deficit. Knowledgeable leftists, notably Tom Daschle and Uwe Reinhardt, recognize that Congress is no good at eliminating wasteful health care spending because politics gets in the way. (Every dollar of wasteful health care spending is a dollar of income to somebody, and that somebody has a lobbyist.) The Left’s central planners believe they can contain health care costs by creating an independent government bureaucracy that sets prices and otherwise rations care without interference from (read: without being accountable to) Congress. ObamaCare’s new Independent Payment Advisory Board is a precursor to what Daschle calls a “Health Fed,” so named to convey that this new bureaucracy would have the same vaunted reputation for independence as the Federal Reserve.

Politics affects Bernanke’s behavior and the Fed’s behavior. Politics will defang the Independent Payment Advisory Board, and many of ObamaCare’s other purported cost-cutting measures.

Me: This is worrisome. Too much of policy, whether it is  future a Health Fed or the deficit commission, is based on the ability of outside panels to end run Congress —  and of Congress to ultimately cede power.

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