Reply #53: (Chopper Ben) Bernanke says cut spending before raising taxes [View All]

[UpInArms]

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-10-20T150702Z_01_WAT004242_RTRIDST_0_ECONOMY-BERNANKE-SPENDING-URGENT.XML

WASHINGTON, Oct 20 (Reuters) - The United States should cut spending on government programs before it considers hiking taxes to raise revenue, a top White House adviser said on Thursday.

White House economic adviser Ben Bernanke also told the Senate-House Joint Economic Committee that recent recessions have been less severe because inflation has been low and steady thanks to the Federal Reserve's focus on price stability.

Bernanke, a former Federal Reserve governor, is regarded as one of the top contenders to succeed Fed Chairman Alan Greenspan when he retires in January.

Bernanke, in response to a question from the panel, also said he does not anticipate foreign holders of U.S. debt will eventually find the investment too risky to hold.

...a bit more...

Bernanke background:

http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm

excerpt:

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.