- The Washington Times - Thursday, November 10, 2005


Discussions about budget deficits and their impact on the economy will not be off limits to the man in line to become the next chairman of the Federal Reserve, Sen. Charles E. Schumer said yesterday after talking with Ben Bernanke.

The New York Democrat endorsed Mr. Bernanke after meeting with the White House economist and former Fed governor who was chosen by President Bush to succeed Alan Greenspan. Mr. Greenspan retires Jan. 31 after more than 18 years running the Fed.

“While he made clear he didn’t want to be a somebody who talks about specific bills and specific policies, he understood that the role of Fed chairman was to talk about the other side of the economic ledger: fiscal policy and other economic issues,” Mr. Schumer said after the meeting.

Mr. Schumer said he was pleased by that. In a previous conversation with Mr. Bernanke, Mr. Schumer said he was left with the impression that Mr. Bernanke would not talk publicly about fiscal matters as Fed chairman.

Mr. Bernanke has declined to speak to reporters ahead of his confirmation hearing next week in the Senate Banking, Housing and Urban Affairs Committee. Mr. Schumer is a committee member.

Mr. Schumer predicted “an easy confirmation” for Mr. Bernanke. “The only people who might not like him would be on either the far right or the far left,” Mr. Schumer said.

“The idea that we needed some impartial figure to sort of be an overseer of fiscal policy in a broad sense, he had no problem with and thought it was an appropriate role for him as Fed chairman,” Mr. Schumer said after the meeting.

Mr. Bernanke “would not annunciate specific policies … but he would generally talk about things,” Mr. Schumer said.

“So if he thought the deficit was out of control, he would say this tax bill, unless it is paid for, might not be a good thing to do. This spending bill, this entitlement bill, unless it is paid for, might not be a good thing to do,” Mr. Schumer said.

Mr. Greenspan has warned Congress repeatedly that it needs to curb deficits or the economy will face serious problems. The government produced a deficit of $319 billion this year, an improvement from the record ink last year, but still the third highest ever.

The Fed chief’s support of Mr. Bush’s 2001 tax cuts, however, still rankles Democrats, who suspect the reductions have contributed greatly to the budget deficits.

Mr. Schumer also said he did not think Mr. Bernanke was “wedded to a mechanistic formula” when it comes to fighting inflation. Mr. Bernanke supports numerical targets that publicly spell out the Fed’s acceptable bounds of inflation. Mr. Greenspan opposes announcing such a target. Otherwise, they share a similar philosophy.

“I told him he was going to be an outstanding Fed chairman. I think he is in the mold of Alan Greenspan,” Mr. Schumer said.

On China, Mr. Bernanke expressed support for Beijing to take further steps toward a more flexible currency, the senator said.

Mr. Bernanke did not take a position on Mr. Schumer’s bill to impose hefty tariffs on Chinese goods flowing into the United States if such steps are not taken, Mr. Schumer said.

U.S. manufacturers complain that China’s currency is artificially low, giving the Chinese a big trade advantage over U.S. companies.

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