GOP warns Fed more easing would hurt economy

By Greg Robb

The congressional Republican leadership sent a letter this week to Federal Reserve Board Chairman Ben Bernanke urging him to refrain from any more easing moves, saying that the American economy should be driven by consumer confidence and worker innovation and not central-bank policy. Such moves could hurt the U.S. dollar, the letter said. "We have serious concerns that further intervention by the Fed could exacerbate current problems or further harm the U.S. economy," the letter from the GOP congressional leaders added. The letter was sent to Bernanke on Monday as he prepared for a two-day meeting of the Federal Open Market Committee, which sets monetary policy. With interest rates, the Fed's traditional policy tool, stuck near zero, the Fed has been considering unconventional steps to revive the economy. The FOMC's decisions are expected to be announced Wednesday afternoon. 

Dear Chairman Bernanke,

It is our understanding that the Board Members of the Federal Reserve will meet later this week to consider additional monetary stimulus proposals. We write to express our reservations about any such measures. Respectfully, we submit that the board should resist further extraordinary intervention in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people.

It is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate. To the contrary, there has been significant concern expressed by Federal Reserve Board Members, academics, business leaders, Members of Congress and the public. Although the goal of quantitative easing was, in part, to stabilize the price level against deflationary fears, the Federal Reserve’s actions have likely led to more fluctuations and uncertainty in our already weak economy.

We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy. Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers. To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.

Ultimately, the American economy is driven by the confidence of consumers and investors and the innovations of its workers. The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy if measurable outcomes cannot be demonstrated.

We respectfully request that a copy of this letter be shared with each Member of the Board.

Sincerely,

Sen. Mitch McConnell, Rep. John Boehner, Sen. Jon Kyl, Rep. Eric Cantor

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