I was struck by U.S. Federal Reserve Chairman Ben S. Bernanke’s recent remark that Congress should not “play political games with the Treasury Department’s request to boost the government’s borrowing authority beyond the current $14.3 trillion statutory cap.” This statement is obnoxious in light of the fact that politics are being played with quantitative easing (QE2).
Administrative support for QE2 is just another blatant example of political hypocrisy. The rationale behind quantitative easing - that it spurs investment - was vilified by the Democratic leadership when the same strategy was applied to “tax cuts for the wealthy.”
Mr. Bernanke, the Fed and the liberal members of Congress all support and push QE2. They argue that purchasing huge amounts of Treasury securities will reduce long-term interest rates. The effect will be stimulative because this action forces the other potential buyers to do something else with their money - invest in higher-risk and more economically stimulative activity.
Yet aren’t those the same people who were against tax cuts for the highest income earners? Their argument then was that those higher income earners would not use their tax savings for economic stimulative use. Although this is not correct, the hypocrisy is quite staggering. As a certified public accountant and a financial and tax adviser to that segment of the population, I can assure you that large portions of tax savings are invested.
The supporters of QE2 praise lower interest rates but not lower tax margins. They laud investment as a key strategy for economic recovery but only when it is artificially and unconventionally controlled by the government. This dichotomy is calculated and conniving and ultimately endangers the economic future of this country.
ALAN J. DLUGASH
New York City