December 19, 2012
One of the joys of being a central banker, if you can call it that, is business travel to the global economic stages, meeting with bankers and businessmen from across the globe. There’s jet lag, maybe, but it also provides another perspective on our economy for the president of the Federal Reserve Bank in New York, William C. Dudley.
As a key figure in the nation’s economic planning, Dudley spoke out for a budget deal between Congress and the president that can last more than just a few months.
“When I meet with economic leaders across the globe they do not doubt the underlying strength and dynamism of the U.S. economy, or the entrepreneurialism and inventiveness of our people. Nor do they doubt that we have the resources and capability to overcome the challenges we face,” Dudley told a conference at Pace University in New York. “But they do wonder whether our political system is capable of putting the national interest above partisan interests and making the tough choices needed to address these challenges.”
How can that question best be answered? We agree with Dudley that a “truly credible” deal is needed to provide stability to the financial outlook of the government.
Dudley explicitly rejected a key argument from House Speaker John Boehner, R-Ohio, about negotiating with the threat of blocking an increase in the debt ceiling — the borrowing authority for the government, that became a political football in the summer of 2011. The dispute over raising the ceiling redounded to the discredit of Republicans, but it also hurt business confidence.
“We do not want to repeat this experience at the start of 2013,” Dudley said. He is right.
Some revenue increases, involving some tax increases on the best-off households, is inevitable despite the grumbling of the GOP leaders. But if a deal is cobbled together, we believe that it should be a comprehensive measure that does not require another battle over the debt ceiling early next year.
Stability, not just a deal that will postpone political fights for a few weeks or months, is a virtue. It will allow the natural strengths of the U.S. economy noted by Dudley to flourish.
“If a credible bipartisan agreement is reached, it will strengthen global confidence in the U.S. and underscore to the world that our country remains a great place to do business and invest in,” Dudley warned. “Failure would suggest a degree of political dysfunction that could undermine U.S. economic leadership and could encourage global corporations and investors to invest elsewhere.”
We hope for that kind of result in the talks with Obama and GOP leaders on Capitol Hill.