President Barack Obama Nominates Ben Bernanke for Chairman of the Federal Reserve.
President Obama nominates Ben Bernanke for a second term as Chairman of the Federal Reserve in Marthas Vineyard, Massachusetts on August 25, 2009.
The White and Congress projects record deficits for the next 10 years which will add to our national debt. However as we fact record deficits and a ballooning national debt, we are giving the Federal Reserve new life with the re-nomination of Ben Bernanke as chairman of the Federal Reserve by President Barack Obama. Still the federal government faces exploding deficits and mounting debt over the next decade, White House and congressional budget officials projected Tuesday in rival economic outlooks. Both the White House Office of Management and Budget and the nonpartisan Congressional Budget Office predicted the budget deficit this year would swell to nearly $1.6 trillion, a record. But while figures released by the Whit House foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May, congressional budget analysts put the figure at a lower $7.14 trillion. Still, the CBO said in its midsummer budget update, "putting the nation on a sustainable fiscal course will require some combination of lower spending and higher revenues than the amounts now projected." Both projects see the overall national debt, which now stands at $11.7 trillion, nearly doubling over the next decade.
Now while our nation was hearing the news of a soaring national debt and record breaking deficits, President Barack Obama announced Tuesday he wants to keep Ben Bernanke on as Fed chairman, saying he shepherded America through the worst economic crisis since the Great Depression. "Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and out-of-the-box thinking that has helped put the brakes on our economic freefall," said Obama, with Bernanke standing by his side. "Almost none of the decisions he or any of us made have been easy." Obama made the announcement while on vacation on the island of Martha's Vineyard off the coast of Massachusetts after aides said initially that the president intended a news-free week there. Both he and Bernanke sported the open-collar look. Bernanke, 55, is credited with turning the economy away from its deepest and longest recession since the 1930s. Now he faces the challenge of meeting White House expectations to chart the full economic recovery considered critical to Obama's legacy.
In sticking with a Republican for the nation's top banker, the Democratic president was aiming for stability at a time of continuing, though easing, crisis. The move was designed to reassure the U.S. financial sector as well as foreign central banks that the Obama administration isn't changing course on its largely well-received approaches to the financial meltdown and overall monetary policy. The announcement also came nearly concurrently with a piece of bad economic news. Obama interrupted his vacation to telegraph his decision just ahead of a White House report that gave more bleak assessments of the nation's deficit picture. Figures released by the White House budget office on Monday foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May. Moreover, the figures show the public debt doubling by 2019 and reaching three quarters the size of the entire national economy. Also Monday, analysts with the nonpartisan Congressional Budget Office projected a cumulative $7 trillion deficit from 2010-2019, more in line with the administration's May estimate. The White House said Obama decided on the last-minute schedule addition to help "put him more in `vacation mode." "There's been a lot of speculation out there, and the president wanted to put it to rest," Deputy Press Secretary Bill Burton told reporters as the presidential entourage headed from the site of the announcement to a golf course.
Bernanke's early tenure was as complicated as the crisis facing the banks he sought to save. The Fed chairman's successful, although unconventional, strategy to move the economy away from recession, unlock frozen credit and stabilize spiraling financial markets depended in large part on creating radical and unprecedented lending programs. But he's not without his detractors, and the Democratic chairman of the Senate Banking Committee, Connecticut's Chris Dodd, immediately warned of a thorough hearing before Bernanke would be confirmed for a second four-year term. With such controversy surrounding some of his decisions, Bernanke's fate had been the subject of speculation for months. Many on Wall Street and in academic circles had viewed Bernanke as the best choice to tackle continued high unemployment, fight off any threat of inflation and take on the next set of risky, difficult decisions. Announcing his decision to bypass prominent Democratic economic figures for the job, Obama had nothing but praise for Bernanke.
The president also put in a plug for his own administration's actions to stabilize the financial system, restructure the auto industry and approve $787 billion in stimulus spending. Appearing in makeshift press workspace on the island, Bernanke said that if confirmed by the Senate, he'd work to provide "a strong foundation for growth and stability" in the economy. "The Federal Reserve, like other economic policy makers, has been challenged by the unprecedented events of the past few years," Bernanke said. "We have been bold or deliberate as circumstances demanded, but our objective remains constant: to restore a more stable financial and economic environment in which opportunity can again flourish and in which Americans hard work and creativity can receive their proper rewards." The economy is emerging from recession and is poised for growth. However, it will be slow-going and the unemployment rate, now at 9.4 percent, is likely to top 10 percent this year before it starts going down. For Obama, there was little political downside in choosing to nominate Bernanke. The move displays bipartisanship and a steady, unchanging hand on the economic tiller. Fully occupied with an attempted health care overhaul, Obama's team could little afford the distraction of changing the head of the Fed. Bernanke was appointed Fed chairman by President George W. Bush and sworn in Feb. 1, 2006, following Alan Greenspan's 18-year tenure.
Still the reappointment of Bernanke helped the Federal Reserve continue to manipulate the financial markets because data and Bernanke lifted the markets on Tuesday after they declined on Monday. Stocks climbed Tuesday, boosted by upbeat data on house prices and consumer confidence and news of the reappointment of Ben Bernanke as Federal Reserve chairman. The Dow Jones Industrial Average was recently up about 60 points to 9569.52. The S&P 500 gained 0.6% to 1031.78, and the Nasdaq Composite added 0.6% to 2029.21. U.S. home prices rose in the second quarter for the first time in three years while logging a second-straight monthly increase in June, according to the S&P Case-Shiller home-price indexes. For the second quarter, the S&P Case-Shiller U.S. National Home Price Index posted a 14.9% drop from a year earlier, an improvement over the record 19.1% drop in the first quarter. It was up 2.9% sequentially. U.S. consumer confidence rebounded in August, a report released Tuesday said. The Conference Board, a private research group, said its index of consumer confidence increased to 54.1 in August from a revised 47.4 in July, which was originally reported as 46.6. The current month's reading was far above economists' expectations of 47.0, according to a survey conducted by Dow Jones Newswires.
U.S. markets are moving opposite overseas markets, which were declining amid economic concerns in China. Chinese Premier Wen Jiabao on Tuesday cautioned against being "blindly optimistic" about the country's economic recovery, saying the boost from short-term policies may fade, while longer-term policies will take some time to have an impact. President Barack Obama early Tuesday hailed Mr. Bernanke for helping the world economy avoid a depression. "I don't think the market is at all surprised. Why would you switch horses midstream with the expert of the Great Depression and the Japanese lost decade?" said Robert Howe, founder of Hong Kong-based Geomatrix. On the corporate front, Burger King Holdings advanced 8% after it posted a 16% increase in second-quarter net profit. Manitowoc fell 7.2% as it is leaving the index the S&P 500. Ford Motor added 2.6%, reversing Monday's retreat on the end of cash-for-clunkers. Major indexes were little changed Monday after posting four consecutive daily gains last week, with the S&P 500 retreating a fraction of a point, the Nasdaq Composite losing 2 points while the blue chip Dow Jones Industrial Average rising 3 points. Regional banks were especially hit hard amid concern about potential mounting losses from commercial real estate. Overseas, the Shanghai Composite closed 2.6% lower, while European stocks added modest gains. Oil futures, after hitting a 2009 high on Monday, edged higher above $74 a barrel and the dollar index fell slightly.
Still the Obama administration, citing an economic downturn that has been deeper than it had first thought, raised its estimate on Tuesday of the government’s deficit over the next decade to $9 trillion from $7.1 trillion. Despite the shortfalls, White House officials said they saw no reason to back away from President Obama’s ambitious and costly goal of overhauling the health care system. The new amount includes the cost of the health care overhaul as well as about $600 billion in additional revenue that the administration hopes to raise, two initiatives Congress has yet to approve. “A lot of people will look at this deficit and say we cannot afford health care reform,” said Peter R. Orszag, director of the Office of Management and Budget. But Mr. Orszag said the opposite was true: the only way to control spiraling Medicare costs, he said, was to get control of overall health care costs by overhauling the system “The size of the fiscal gap is precisely why we must enact fiscally well designed health care reform now,” Mr. Orszag said.
Now Republicans are certain to attack that argument. Indeed, they are already doing so. Analysts at the Congressional Budget Office put their deficit estimate slightly lower, at $7.14 trillion, though the agency uses a slightly different method to reach its estimate. The budget office takes into account only policies already in place, while the administration can consider policies and budget decisions that its hopes to install. White House officials predicted that the budget deficit this year will peak at $1.58 trillion, though they said the 2009 shortfall will be about $261 billion lower than they had predicted in May. The main reason is that officials have decided that they will not need another round of bailout money for the nation’s banks. The Congressional Budget Official also estimated a deficit this year of about $1.6 trillion. In the earlier budget forecast, administration officials had created a “placeholder” of $250 billion to cover possible costs of an additional bank bailouts. They also assumed higher costs for the Federal Deposit Insurance Corporation’s expansion of deposit insurance and debt guarantees. Even so, the administration is projecting that annual deficits will remain above $1 trillion through 2011 and will be bigger than any since World War II, even when measured conservatively as a share of the nation’s economic output. The government’s total debt would roughly triple by 2019 to $17.5 trillion under the new estimate, almost $2 trillion more than the White House estimated in May. Measured as a share of the nation’s economic output, public debt would hit 76.5 percent of gross domestic product by 2019 — by far the highest percentage in the past half-century — from about 56 percent this fiscal year. This year will be the first time the number has exceeded 50 percent since World War II. The previous estimate was about 67 percent.
The biggest reason for the additional red ink is the administration’s recognition that the recession has been deeper and unemployment has been much higher than White House forecasters assumed in their first budget estimate in May. The added depth of the downturn is expected to increase payouts for unemployment benefits and other safety-net programs, while reducing tax receipts more than originally expected. The administration had originally assumed that the economy would shrink 1.2 percent and that unemployment would average about 8.1 percent this year. Instead, the economy is expected to shrink almost 2 percent while unemployment is expected to average 9.3 percent in 2009 and 9.8 percent in 2010. For the first time, administration officials officially predicted on Tuesday that unemployment would climb above 10 percent by early next year, from 9.4 percent in July. The costs of the additional unemployment and the slower growth extend beyond the next year or two, not just because the economy will take longer to return to normal but also because the government’s interest expense will be compounding more rapidly. Mr. Orszag estimated that, by 2019, interest expenses will account for more than 80 percent of the projected deficit of $917 billion. Without offering any details, the White House budget director said that President Obama will soon unveil plans to reduce long-term deficits tied to soaring costs of Medicare, Social Security and other entitlement programs.
The chilling forecast that the White House is predicting should make all American wonder why is our nation’s national debts growing and why aren’t our nation’s leaders trying to practice fiscal responsibility in order to deal with our nation’s mounting deficits. A 10-year federal deficit of $9 trillion — more than the sum of all previous deficits since America's founding should make all Americans angry but what should make many of us even more angry is that our financial markets seem to be manipulated by what the Federal Reserve does and who the chairman of the Fed is. So the fact that by the next decade's end the national debt will equal three-quarters of the entire U.S. economy should raise major red flags as to what direction our nation is headed in financially. But before President Barack Obama can do much about it, he'll have to weather recession aftershocks including unemployment that his advisers said Tuesday is still heading for 10 percent. Overall, White House and congressional budget analysts said in a brace of new estimates that the economy will shrink by 2.5 to 2.8 percent this year even as it begins to climb out of the recession. Those estimates reflect this year's deeper-than-expected economic plunge.
The grim deficit news presents Obama with both immediate and longer-term challenges. The still fragile economy cannot afford deficit-fighting cures such as spending cuts or tax increases. But nervous holders of U.S. debt, particularly foreign bondholders, could demand interest rate increases that would quickly be felt in the pocketbooks of American consumers. Amid the gloomy numbers on Tuesday, Obama signaled his satisfaction with improvements in the economy by announcing he would nominate Republican Ben Bernanke to a second term as chairman of the Federal Reserve which resulted in stocks jumping on Wall Street. The announcement, welcomed on Wall Street, diverted attention from the budget news and helped neutralize any disturbance in the financial markets from the high deficit projections. This is all the more reason why the Federal Reserve needs to be abolished because Wall Street and foreign investors are too dependent on the Fed.
So as the White House Office of Management and Budget indicated that the president will have to struggle to meet his vow of cutting the deficit in half in 2013 — a promise that earlier budget projections suggested he could accomplish with ease. "This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter," said Obama economic adviser Christina Romer. The deficit numbers also could complicate Obama's drive to persuade Congress to enact a major overhaul of the health care system — one that could cost $1 trillion or more over 10 years. Obama has said he doesn't want the measure to add to the deficit, but lawmakers have been unable to agree on revenues that would cover the cost. What's more, the high unemployment is expected to last well into the congressional election campaign next year, turning the contests into a referendum on Obama's economic policies. Republicans were ready to pounce on this in which they should because these growing numbers in the nation’s debt and deficits makes me worry what the future of our nation will look like financially.
"The alarm bells on our nation's fiscal condition have now become a siren," said Senate Minority Leader Mitch McConnell of Kentucky. "If anyone had any doubts that this burden on future generations is unsustainable, they're gone — spending, borrowing and debt are out of control." Even supporters of Obama's economic policies said the long-term outlook places the federal government on an unsustainable path that will force the president and Congress to consider politically unpopular measures, including tax increases and cuts in government programs. "The numbers today portend the biggest budget fight we've probably had in decades in the United States," said Stan Collender, a former congressional budget official. The summer analyses by the White House budget office and by the Congressional Budget Office reached similarly bleak conclusions. The CBO's 10-year deficit figure was smaller — $7 trillion — but that is because it assumes that all tax cuts put into place in the administration of former President George W. Bush will expire on schedule by 2011. Obama's budget baseline, however, hews to his proposal to keep the tax cuts in place for families earning less than $250,000 a year.
Both budget offices see the national debt — the accumulation of annual budget deficits — as more than doubling over the next decade. The public national debt, made up of amounts the government owes to the public, including foreign governments, stood Tuesday at a staggering $7.4 trillion. White House budget officials predicted it would reach $17.5 trillion in 2019, or 76.5 percent of the gross domestic product. That would be the highest proportion in six decades. Congressional Budget Office director Douglas Elmendorf said if Congress doesn't reduce deficits, interest rates are likely to rise, hurting the economy. But if Congress acts too soon, the economic recovery — once it arrives — could be thwarted. "We face perils in acting and perils in not acting," Elmendorf told reporters. David Walker, former head of the Government Accountability Office, said the numbers illustrated the need for a national commission that would review spending and taxing options and present lawmakers with a deficit reduction plan that Congress could approve or reject. "We're going to have to do a hard course correction once we turn the corner on the economy," Walker, now president and CEO of the Peter G. Peterson Foundation, said.
Both Romer and Obama budget director Peter Orszag said this year's contraction would have been far worse without money from the $787 billion economic stimulus package that the president pushed through Congress as one of his first major acts. At the same time, the continuing stresses on the economy have, in effect, increased the size of the stimulus package because the government will have to spend more in unemployment insurance and food stamps, Orszag said. He said the cost of the stimulus package — which spends most of its money in fiscal year 2010 — will grow by tens of billions of dollars above the original $787 billion. The White House also credited the $3 billion cash-for-clunkers auto program for contributing to recent economic growth. Orszag, anticipating backlash over the deficit numbers, conceded that the long-term deficits are "higher than desirable." The annual negative balances amount to about 4 percent of the gross domestic product, a number that many economists say is unsustainable.
But Orszag also argued that overhauling the health system would reduce health care costs and address the biggest contributor to higher deficits. "I know there are going to be some who say that this report proves that we can't afford health reform," he said. "I think that has it backward." At the same time, 10-year budget projections can be "wildly inaccurate," said Collender, now a partner at Qorvis Communications. Collender noted that there will be five congressional elections over the next 10 years and any number of foreign and domestic challenges that will make actual deficit figures very different from the estimates. Despite all of that, the fact the Federal Reserve grows stronger and our nation’s national debt and deficits continue to soar makes me wonder what the actual purpose of the Fed is if as a central bank it can’t help curb our nation’s deficits. As my friend Mike Troxel told me, “Paying off our debt is absolutely imperative because it is no coincidence that the last president to get rid of the Federal Reserve [Second Bank of the United States] was also the last president (Andrew Jackson) to without a deficit.” Since the establishment of the Federal Reserve, every President has had deficit and our nation has seen a Great Depression and some form of a recession nearly every decade. Until we eliminate the Federal Reserve and stop being charged interest for our own money supply being creating which is what the Treasury does any way than our national debt and deficits will continue to sky rocket.
America can’t continue to allow the Federal Reserve to grow stronger as our nation’s debt and deficits continue to rise. Think about it people, our nation has tooled with a central bank since our creation and one of our nation’s founders and President, Thomas Jefferson was against a central bank. Thomas Jefferson who was Secretary of State under President George Washington and House of Representative member James Monroe didn’t believe in the central bank idea that Secretary of Treasury Alexander Hamilton proposed. Nonetheless, prior to 1913 and the creation of the Federal Reserve, our nation had two other attempts at a central banks with the First Bank of the United States and the Second Bank of the United States.
Now the First Bank of the United States was a bank chartered by the United States Congress on February 25, 1791. The charter was for 20 years. The Bank was created to handle the financial needs and requirements of the central government of the newly formed United States, which had previously been thirteen individual colonies with their own banks, currencies, and financial institutions and policies. Officially proposed by Alexander Hamilton, Secretary of the Treasury, to the first session of the First Congress in 1790, the concept for the Bank had both its support and origin in and among Northern merchants and more than a few New England state governments. It was, however, eyed with great suspicion by the representatives of the Southern States, whose chief industry, agriculture, did not require centrally concentrated banks, and whose feelings of states' rights and suspicion of Northern motives ran strong. Now the bank's charter expired in 1811 under President James Madison but in 1816, however, Madison revived it in the form of the Second Bank of the United States.
The Second Bank of the United States was chartered in 1816; five years after the First Bank of the United States lost its own charter. The Second Bank of the United States was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank, and had branches throughout the nation. The Second Bank was chartered by many of the same congressmen who in 1811 had refused to renew the charter of the original Bank of the United States. The predominant reason that the Second Bank of the United States was chartered was that in the War of 1812, the U.S. experienced severe inflation and had difficulty in financing military operations. Subsequently, the credit and borrowing status of the United States were at their lowest levels since its founding.
The Second Bank of the United States was authorized for a twenty year period during James Madison's tenure in 1816. However President Andrew Jackson worked to rescind the bank's federal charter. In Jackson's veto message (written by George Bancroft), the bank needed to be abolished because:
1.) It concentrated the nation's financial strength in a single institution.
2.) It exposed the government to control by foreign interests.
3.) It served mainly to make the rich richer.
4.) It exercised too much control over members of Congress.
5.) It favored northeastern states over southern and western states.
Following Jefferson, Jackson supported an "agricultural republic" and felt the Bank improved the fortunes of an "elite circle" of commercial and industrial entrepreneurs at the expense of farmers and laborers. After a titanic struggle, Jackson succeeded in destroying the Bank by vetoing its 1832 re-charter by Congress and by withdrawing U.S. funds in 1833.
The bank's money-lending functions were taken over by the legions of local and state banks that sprang up. This fed an expansion of credit and speculation. At first, as Jackson withdrew money from the Bank to invest it in other banks, land sales, canal construction, cotton production, and manufacturing boomed. However, due to the practice of banks issuing paper banknotes that were not backed by gold or silver reserves, there was soon rapid inflation and mounting state debts. Then, in 1836, Jackson issued the Specie Circular, which required buyers of government lands to pay in "specie" (gold or silver coins). The result was a great demand for specie, which many banks did not have enough of to exchange for their notes. These banks collapsed. This was a direct cause of the Panic of 1837, which threw the national economy into a deep depression. It took years for the economy to recover from the damage. The U.S. Senate censured Jackson on March 28, 1834, for his action in removing U.S. funds from the Bank of the United States. When the Jacksonians had a majority in the Senate, the censure was expunged.
Still in 1835, Jackson managed to reduce the federal debt to only $33,733.05, the lowest it had been since the first fiscal year of 1791. President Jackson is the only president in United States history to have paid off the national debt. However, this accomplishment was short lived because a severe depression from 1837 to 1844 caused a ten-fold increase in national debt within its first year but that was after Jackson’s tenure as President was done. Plus as a result of the U.S. economy not being backed by gold and silver under the central bank system, it caused many problems in the nation once the Fed was abolished. This should signal to all Americans that even during the recession we have experienced, the only stock that constantly rose was gold and gas. Therefore our nation should get back on the gold standard now in order to avoid a depression or recession once we abolish the Federal Reserve in order balance our nation’s national debt and deficits.
The abolishment of the Federal Reserve must happen now if we are to deal with our national debt and soaring deficits to preserve our financial future for future generations of American’s.
ABOLISH THE FEDERAL RESERVE NOW!
Source:
THE ELIMINATION OF THE NATIONAL DEBT IN 1835 AND THE MEANING OF JACKSONIAN DEMOCRACY
By Carl Lane, Professor of History at Felician College
Lodi & Rutherford, New Jersey
http://www.business.auburn.edu/~whittdo/THE%20ELIMINATION%20OF%20THE%20NATIONAL%20DEBT%20IN%201835.htm
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