By Steven K. Beckner
HOUSTON (MNI) – Dallas Federal Reserve Bank President Richard
Fisher said Wednesday that the Fed is doing “as much as is prudent” to
stimulate the economy and said it is now up to “politicians” to “get it
right” on fiscal and regulatory policy.
Fisher, speaking to the press following an address to Houston-area
business people and other leaders, said firms will only begin hiring and
expanding their business when they become less uncertain about
government policy in a variety of areas, including tax rates, health
care and financial regulations.
Earlier in prepared remarks, Fisher had much the same emphasis.
He said there is a limit to what the central bank can do in a
climate of great uncertainty. An official in the Carter and Clinton
administrations, he said firms are reluctant to hire and invest because
of uncertainty about “capricious” government tax and regulatory
policies.
Fisher will be a voting member of the Fed’s policymaking Federal
Open Market Committee next year, when the Fed may be considering
additional stimulus measures — most likely expanded purchases of bonds
to push down long-term interest rates. But he said he will be
“reluctant” to support an expansion of the Fed’s balance sheet unless
federal fiscal and regulatory policies are made more friendly to
economic growth and job creation.
Otherwise, he said, further Fed credit easing efforts might amount
to nothing more than “pushing on a string.”
Asked whether he would support additional fiscal stimulus, Fisher
said it is not up to him to say what kinds of tax and spending programs
Congress should pass, but he said “the key is that whatever tax and
spend problems are constructed by Congress need to be focused on
providing incentives for job creation … . If we were to have
additional stimulus dollars … they need to be constructed with that in
mind.”
“If we decide not to have additional stimulus dollars … existing
stimulus dollars should be geared to promoting economic growth,” he
continued, adding that “now is the time to be especially mindful” of the
impact of government programs.
“We have to make sure the recovery continues,” he went on, adding,
“we’re doing as much as is pruduent on our part.”
Fisher said that just last week, he sat in on a financial planning
and budgeting discussion with middle managers of one of America’s
leading consumer goods producers.
He said that when he asked the unidentified company’s chief
financial officer how his firm determines the “all-in cost of an
employee,” the CFO replied, “We can’t. We can’t because we don’t know
what will happen on the tax front or with social overhead.”
“So their current plan is to withhold payroll expansion in the
United States while investing their growing cash reserves in driving
productivity enhancement from their current crop of over 200,000
employees, of which about 70,000 are located in the United States,”
Fisher related. “Meanwhile, they are searching to expand their
operations in other countries that “offer better incentives, stability
and a more entrepreneurial environment.”
“Ouch!” Fisher added.
In response to audience questions, he said that America’s
“entrepreneurial spirit” needs to be restored and suggested that if
people are frustrated with their politicians, they should vote them out
of office.
Asked by MNI to elaborate on the particular areas of concern that
business people in his Southwestern district are expressing, Fisher was
not overly specific, but said, “What I’m hearing … it’s not having the
certainty of knowing what’s coming down the path.”
“The enemy of decisionmaking is uncertainty,” he said. “Of course
you never eliminate uncertainty, but you like to narrow it down.”
Fisher said firms are telling him that “not knowing the impact of
health care … not knowing (what’s going to happen to) tax rates …
are inhibiting their commitment to long-term business.”
“Business doesn’t just callously hire and fire people,” he
continued. “Until you know the cost you can’t make a decision to commit
large amounts of capital in that area.”
Fisher said “it would be helpful if we have greater clarity.” He
said no particular area of government policy is the problem. “It’s a
broader thing than just a single issue.”
If firms get more “clarity” on taxes and regulation, “we should see
more job creation,” he said. “If (firms become) more certain … we
should have some relief” on hiring.
Fisher emphasized that he is not the only Fed official who feels
this way. And indeed, minutes of the Aug. 10 FOMC meeting make a number
of references to the adverse impact of policy uncertainty.
Returning to the theme of limits on what the Fed can do, Fisher
said monetary policy “has to be complemented with fiscal and regulatory
initiatives, including what we do with the financial regulatory system.”
Lawmakers “have to get it right,” he said.
Fisher downplayed fears that the U.S. economy is doomed to follow
Japan into a deflationary stagnation. “I don’t buy the argument,” he
said, adding, “I’m kind of tired of hearing about” the U.S.-Japan
comparison.”
Noting that he lived in Japan, he said “we’re a different society.”
He also noted that, in the early stages of its deflationary spiral,
Japan “raised taxes … exactly not what to do.”
“We’re not going to let that happen,” he said. “We’re Americans,
and this is a different circumstance.”
While the U.S. is not likely to go down the Japanese road, Fisher
said recovery is going to “take some time … .It will take some time
for the ship to right and get back on course.”
“We prevented it from capsizing with monetary policy,” Fisher said,
but “it will take time … to close the income gap.”
And he warned again, “You can’t have consumption drive the economy
if you don’t have jobs, and you can’t have jobs if you don’t incent
people to hire.”
In other comments, Fisher offered little but gloom on the outlook
for the housing market. He said the “excess supply” of unsold homes on
the market “will take a long time to work out.”
“I don’t expect a pick-up” soon, he said. “There is a sense that
things have bottomed out, but the prospect for a robust real estate
market is not very significant…As for the housing market driving the
economy, I just don’t see that happening far as the eye can see…I
don’t see that as a major source of economic growth for some time to
come.”
** Market News International **
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