Dear Federal Reserve Chairman Ben Bernanke,
Welcome to the intense scrutiny you will receive as the chairman of the Federal Reserve and student of the nation’s economy. After all, you are following in the footsteps and cryptic phraseology of a man some economists referred to as “a rock star.” Realizing your first big test is next week when you testify before Congress, I have a few suggestions for your remarks.
The account deficit is more than worrisome. President Bush has continued his tax cut-and-spend approach to governing, most recently evidenced by a bloated $2.77 trillion budget proposal.
With an estimated $423 billion budget deficit by the end of this fiscal year, our future economic growth may be in peril. I realize you are not in control of our nation’s fiscal policy, but it is important for you to clearly and forcefully make the point that our deficits are unsustainable for future generations.
Related to this point, we are creating a crisis by lack of personal savings. As a college student, I realize that saving money is a formidable proposition, and the fact that last year our country spent more than it earned is troublesome. To put a little perspective on the depth of the problem, the last time we had a full year of negative savings was in 1933 as the country was in the grips of the Great Depression.
I am not suggesting such dire economic times are upon us, but it is incumbent upon your recent elevation in stature to advocate greater fiscal discipline. As you surely understand, the rise in housing prices, consumer spending and credit card debt are all related to foreign borrowing.
Largely due to nations such as China and Japan, we have been able to artificially increase our standard of living, as the two countries have been buying up our treasury debt. Congress needs your warning that China has already indicated a desire to possibly shift new reserves into other currency. If this happens and housing prices stabilize and consumer spending falls, as The Economist stated in a recent article, “It is hard to see how this can occur without a sharp slowdown in the economy.”
In addition, take time to urge Congress to balance the exuberant economic numbers with the realities of other areas of the economy. The unemployment rate is 4.7 percent but if someone has to work multiple jobs to afford healthcare, then a low unemployment rate doesn’t mean much.
Likewise, the Dow Jones Industrial Average can go above the 11,000 mark but if corporate stock ownership is concentrated among the wealthy then how does that help the rest of the nation?
These are but a few of the examples of the widening chasm between the capital owners and laborers, both of whom depend upon your ability to foster stable prices, maximum employment and economic growth. Encourage Congress to join the Federal Reserve in promoting sound macroeconomic policies that benefit the entire country – not just the corporate elite.
Finally, capitalize upon your academic experience as a professor at Princeton and Stanford to advocate that Congress invest more budgetary emphasis towards expansion of human capital. In the same $2.77 trillion budget proposal mentioned earlier, nearly one-third of eliminated programs would be from education.
A crucial part of our future as an economic power in the world is to invest in the classroom today. If we don’t prioritize education today, then tomorrow’s generation will find America bidding on technological breakthroughs that other countries have achieved. Urge Congress to provide students the equality of opportunity to receive the education that is so vital to success in the workplace.
No doubt these issues are complicated and not easily fixed. As the 14th Federal Reserve chairman, you are in a unique position to influence the direction of the nation and to specifically provide a better economy for college students when they enter the job market. I hope you will begin your term as Federal Reserve Chairman with this strong statement to Congress so you can build your own post-Greenspan legacy.
Your economic understudy Aaron.
Aaron Hill is a senior majoring in economics.