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 unanimous decisions. One of the dissenters was Richard Fisher, president of the Dallas Federal Reserve Bank. He offered some trenchant observations about why businesses aren’t hiring new workers or expanding operations and why they likely won’t 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.” 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.”
And it’s not just business executives who 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 foregoing or delaying 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 once President Barack Obama returns from 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 Congress supercommittee that is supposed to find another $1.2 trillion in spending cuts.
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 supercommittee to go beyond superficial reductions in such federal outlays. Rep. Xavier Becerra, D-Los Angeles, 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. The study found similar numbers when contributions from the insurance, finance and real estate industries were examined.