Eyebrows were raised last week when three members of the Federal Reserve Board’s Federal Open Market Committee dissented from the decision to keep interest rates steady as they are through 2013. Deliberations of the FOMC traditionally issue in unanimous decisions, but unanimity is all the more difficult to achieve when the usual political and policy prescriptions in the nation’s capital have failed to bring the economy out of a deep recession. One of the dissenters was Richard Fisher, president of the Dallas Federal Reserve Bank. In a speech reported by the Hill, Fischer offered some trenchant observations about why businesses aren’t hiring new workers or expanding operations and why they likely won’t be for some time to come.
“They simply cannot budget or manage for the uncertainty of fiscal and regulatory policy,” Fisher said. “There is palpable angst surrounding the cost of doing business. According to my business contacts, the opera buffa of the debt-ceiling negotiations compounded this uncertainty, leaving business decision makers frozen in their tracks.” And noting that the recent debt-ceiling deal delayed most of the hard work on cutting the federal budget, he predicted that “it will be devilishly difficult for businesses to commit to adding significantly to their head count or to meaningful capital expansion in the United States until clarity is achieved on the particulars of how Congress will bend the curve of the deficit and debt expansion.”
And it’s not just business executives that see developments in Washington and decide to delay major financial decisions, according to Fisher: “Unless you were on another planet, no consumer with access to a television, radio or the Internet could have escaped hearing their president, senators and their congressperson telling them the sky was falling. It does not take much imagination to envision consumers deciding to forego or delay some discretionary expenditure they had planned.”
Consumers and members of the business community are right to be skeptical that any real progress will be made toward getting to clarity on federal spending reductions once President Obama returns from his latest vacation at Martha’s Vineyard and Congress completes its August recess. A study of campaign contribution data by the Center for Responsive Politics makes clear the suffocating grip of key special interests on the dozen members of that so-called “Super Congress” that is supposed to find another $1.2 trillion in spending cuts.
Take the health care industry, for example. Medicare and Medicaid spending are key drivers of the $14.5 trillion national debt and the explosion of federal entitlement spending. But don’t expect the Super Congress to go beyond superficial reductions in such federal outlays. Rep. Xavier Becerra, D-Calif., is the panel’s leading recipient of contributions from health care industry donors at $1.3 million, or 17 percent of his $8.1 million campaign war chest. The median average for all 12 members is 8 percent, with Sen. John Kerry, D-Mass., and Rep. Jeb Hensarling, R-Texas, bringing up the rear at 2 and 3 percent, respectively. The study found similar numbers when contributions from the insurance, finance and real estate industries were examined.
