In Ben Bernanke’s final scheduled press conference as Chairman of the Federal Reserve, he had some unusually strong words for Congress–his partner in efforts to stimulate the economic recovery.
“We’ve had very tight fiscal policy,” Bernanke said. “People don’t appreciate how tight fiscal policy has been.”
You’re forgiven if those don’t sound like fightin’ words to you. But remember, central bank heads strive for be as bland and innocuous as possible. One of the central tenants of modern central banking is that the central bank should be independent of the legislature. It’s not really the job of the Fed Chair to tell Congress what to do, nor vice versa.
But when Bernanke was asked to defend his institution’s response to the recovery, he couldn’t do so without discussing the effects of fiscal policy too. Basically the above quote was meant to illustrate that what the following chart from the blog Calculated Risk shows: the government sector has been a far bigger drag on this recovery than in recoveries past.
As you can see, total government employment under President Obama has been falling basically since before the recession really even ended. The shift from stimulus to budget cuts happened pretty rapidly after Washington was spooked by the large deficits that were a result of the financial crisis and stimulus package.
If Bernanke had his druthers, Congress would be reversing the above trends, hiring back all these government workers and instead focusing its budget-cutting efforts at long-term mandatory spending like Medicare.