http://www.bloomberg.com/apps/news?pid=20601087&sid=adDANopNzewM

Sept. 25 (Bloomberg) — Federal Reserve General Counsel Scott Alvarez said audits of monetary policy by the U.S. Congress could lead to higher interest rates and reduced confidence in central bank policy.

Congressional audits of monetary policy could “cause the markets and the public to lose confidence in the independence of the judgments of the Federal Reserve,” Alvarez told the House Financial Services Committee today in response to a question from Representative Dennis Moore, a Kansas Democrat. Alvarez said in his prepared remarks the audits would probably “chill” the central bank’s discussions on interest rates.

Fed Chairman Ben S. Bernanke and his colleagues are trying to persuade lawmakers not to pass legislation sponsored by Representative Ron Paul of Texas that would repeal the central bank’s immunity to audits of monetary policy. Fed officials used emergency powers to protect creditors of Bear Stearns Cos. and American International Group Inc. during the financial crisis, prompting congressional scrutiny.

Ironically, or scarily, Cheney sounds like a Keynesian here. I’d have to hear the overall context. He’s probably advocating “military Keynesianism”: spend on the military and cut the social spending. Reagan doubled the national _debt_ as it had accumulated going all the way back to Washington, but increased military spending and cut taxes for the rich, initiated the idea of cutting welfare and social spending.

I’m not sure what has happened in Africa or Latin America with respect to deficit spending. “We” say forgive the Third World Debt !

The good thing about the basic and original Keynes approach is that it counsels social spending to put money into the hands of masses, that is to raise mass “effective demand” for “economic stimulus”. The more money people on welfare or unemployment have, the more they buy goods and services.

Thinking more narrowly about the US mainly, the rightwing uses the notion of balanced budget as an excuse to cut social programs in the US federal budget. Of course, they don’t cut the military budget to balance the overall budget.

What say you ?

^^^^
Keynesian,or social democratic, economic theory favors and advocates deficit spending fiscal policy.

http://www.cepr.net/index.php/publications/reports/economists-letter-to-congress-in-support-of-a-new-economic-stimulus-package/

November 19, 2008
The Honorable Henry Reid The Honorable Nancy Pelosi
Senate Majority Leader Speaker of the House
Washington, DC 20510 Washington, DC 20515
The Honorable Mitch McConnell The Honorable John Boehner
Senate Minority Leader House Minority Leader
Washington, DC 20510 Washington, DC 20515
Dear Sen. Reid, Sen. McConnell, Speaker Pelosi, and Rep. Boehner:
We, the undersigned economists, urge Congress to pass a new stimulus package as
quickly as possible. The need to deal with financial turmoil has directed attention away
from the “real” economy. But the latest data clearly show that the economy is entering a
serious recession, initiated by the collapse of homebuilding and intensified by the
paralysis of credit markets. Without a fast an effective response by government, the
economy could continue to spiral downward, leading to a large increase in
unemployment and a sharp decline in GDP.
The potential severity of the downturn suggests that a boost to demand on the order of
2.0-3.0 percent of GDP ($300-$400 billion) would be appropriate, with the goal being to
get this money spent quickly. The list of targets includes:
a) aid to state and local governments that are being forced to make emergency
cutbacks as revenues fall;
b) extending unemployment insurance and increasing other benefits targeted toward
low and moderate income households who are likely to spend quickly;
c) moving forward infrastructure projects that have already been planned and
scheduled; and
d) providing tax credits and other support for “green” projects that can be done
quickly, such as retrofitting homes and businesses for increased energy
efficiency.
The sharp falloff in demand resulting from the collapse of the housing bubble and the
destruction of financial wealth means that there is little reason to fear that enlarged
deficits will raise interest rates and deter private investment. It is far more likely that an
effective stimulus package will promote investment by improving prospects for higher
sales and profits.
With little downside risk and much potential gain, it is important that Congress move
quickly and decisively. Delay can only deepen and prolong the recession.
Sincerely,
Economists’ Letter to Congress