Sen. Cramer Questions Federal Reserve Chair on Economic Impact of Federal Deficit Spending at Banking Committee Hearing

Source: United States Senator Kevin Cramer (R-ND)

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WASHINGTON – At a Senate Banking Committee hearing yesterday, U.S. Senator Kevin Cramer (R-ND) questioned Federal Reserve Chairman Jerome Powell about his views on the impact deficit spending has on the economy. Their exchange comes as Senate Democrats unveiled a new $3.5 trillion package while inflation continues to rise in the United States.

“You haven’t always resisted the temptation to give [Congress] advice and, by the way, thank you for it. I think that was good advice. Maybe we look back and say we did too much, but we were in a crisis and you did what you needed to do and we did what we needed to do. I don’t think there’s a lot of regret about that. … What people are not talking about is if we end up at the end of this fiscal year passing a one-year [Continuing Resolution] or something similar, we’re going to spend another $6.8 trillion, $3 trillion of which will be deficit spending,” said Senator Cramer. “Does the economy need another $6.8 trillion spent this year to enhance the recovery? Is there not a detrimental effect to all of that, including the tax increases, when we are in fact in a call-it-whatever-you-want inflationary time and it’s uncertain. There is concern, if not alarm.”

The Chairman declined to answer, noting that while he had advised Congress on fiscal matters during the COVID-19 pandemic, that was an extraordinary circumstance.

“I did a lot of things last year that we’d never done before, and that one in particular had a lot encouragement from the Administration and the leadership on both sides of the hill and both parties. But I swore it off,” said Chairman Powell. “I think we should go back to our regular order, which is the [Federal Reserve] does not play a role in fiscal policy. Whatever you do we take it into account in our policies, but we don’t come out and comment on whether we think something is a good idea or bad idea.”

Last month Senator Cramer and Chairman Powell met to discuss economic issues as well. The senator also questioned the Chairman about the Federal Reserve’s actions in the housing industry and concluded by speaking to his colleagues about the importance of investing in American energy as a way to help reduce carbon emissions.