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Fed Rate Cut & Fiscal Policy

It seems like when I studied economics in college, they talked about monetary and fiscal policy. Today it’s only about monetary policy. Everybody on Wall Street wants the Fed to cut interest rates. They want Bernanke to reinstate the “Greenspan put” to shield traders from their losses. I oppose the “Greenspan put” but that’s not my main point.

My question is, “What happened to FISCAL policy?” Basically, with the Bush tax cuts and deficit spending, fiscal policy is based on a perception of the economic climate as, “Oh my God, we’re all going to die!” The government has to spend and encourage businessmen with tax breaks as if we were in a deep depression and there was no tomorrow. Of course, that is not the case. It’s just that businessmen like you better if you give them money; so, Bush and his cronies have given them tons of money. And he has a 27% approval rating to show for it.

But that puts Bernanke and Treasury Secretary Paulson is a tough spot, because half of their tools — the fiscal policies — are gone. Dick Cheney has already shot his friend in the face and doesn’t have any ammunition left. So, it’s all on Bernanke, who so far seems to be taking his job seriously, much more seriously than Congress, Tony Snow, or George Bush. Bernanke may actually care about this country. If so, hooray for him! But he should not have to fight this battle alone. (Somehow, he, unlike Tony Snow, can live on a government salary.)

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