Revolutionizing House Monetary Policy; Balanced Budget Amendment Wins Backers; Plea to Republicans; Case for Compromise; Irony of Bernanke's QEII

With Republicans taking control of the House, Ron Paul becomes the senior member on the Domestic Monetary Policy Subcommittee of the House Financial Services Committee.

Paul looks to raise hell judging from his plans.

Those looking for good news amidst the insanity of QEII can find it here: Ron Paul Is About to Totally Revolutionize the House Monetary Policy Panel

“I will approach that committee like no one has ever approached it because we’re living in times like no one has ever seen,” Paul said in an interview with NetNet Thursday.

Paul said his first priority will be to open up the books of the Federal Reserve to the American people. “We need to create transparency there. To see what it is they are buying and lending, and who it is they are dealing with,” Paul said.

Paul mentioned that he hoped to use subcommittee hearings to educate the public about the causes of business cycles—which he believes are mainly attributable to monetary manipulation by central bankers.

Monetary reform is also on the agenda. Paul is a noted advocate of the gold standard.

“We will have to have monetary reform,” Paul said. “I think those on the other side of this issue are already planning. They are going to try to replace a bad system with an equally bad system.”

Rubio Supports Balanced Budget Amendment

Rand Paul and Marco Rubio, Tea Party backed candidates, both won and both back a balanced budget amendment.

Please consider Rubio On A Balanced Budget Constitutional Amendment

RUBIO: “Growing our economy is essential. We need new jobs in America. New jobs means new prosperity. New prosperity, by the way, leads to more revenue for government. But what would they use this new revenue for?

“Well, I think that unless there are specific provisions in law preventing it from doing it, government, no matter who’s in charge – Republicans or Democrats, will use it to grow government. That’s why it’s so important that spending constraints be put into law and, specifically in today’s topic, in the Constitution.

“Here’s the deal: history teaches us that no matter who’s in charge of government – Republicans, Democrats, conservatives or liberals – eventually, they will use it to grow government. And if you allow them to, they will borrow money to do it. In essence, every government who’s allowed to spend more money than they take in, will do so. They do it because they don’t want to make difficult decisions.

“That’s why we need a constitutionally balanced budget. That means an amendment to our Constitution that requires the government not to spend more money than it takes in. ....

Senator Jim DeMint on the Balanced Budget Amendment

Hats off to Senator Jim DeMint for his support of a Balanced Budget Amendment as noted in Senators Call for Earmark Moratorium & Balanced Budget Amendment

February 4, 2010

WASHINGTON, DC – Today, U.S. Senators Jim DeMint (R-South Carolina), Lindsey Graham (R-South Carolina), Tom Coburn (R-Oklahoma), John McCain (R-Arizona) called on their colleagues to support a one-year earmark moratorium and a Balanced Budget Constitutional Amendment. The national debt is more than $12 trillion, the President’s budget predicts a $1.6 trillion deficit this year, and the unfunded liability to pay for entitlements in the future exceeds $100 trillion.

According to the Congressional Research Service, last year’s pork barrel spending included 11,320 earmarks totaling nearly $32 billion. Cosponsors of both measures include Senators DeMint, Graham, Coburn, McCain, George LeMieux (R-Florida), Richard Burr (R-North Carolina), Mike Crapo (R-Idaho), James Risch (R-Idaho), Saxby Chambliss (R-Georgia), John Cornyn (R-Texas), and John Ensign (R-Nevada). “Our nation is headed for a fiscal catastrophe and we must take bold action to keep the politicians in Washington from running us off the cliff,” said Senator DeMint. “Americans want real action to reduce spending, not rhetoric and not gimmicks. They know earmarks are at the heart of the spending addiction in Congress and they cannot understand why we don’t have to balance the budget, just like they have to. These two measures will force Congress to shut down the favor factory and begin the process of bold, long-term budget reform.

We hear a lot of talk about the need to be fiscally responsible these days, but very few actually do anything about it. We’re giving our colleagues a chance to back up their rhetoric with action.” “I believe, now more than ever, the only way Congress will ever really balance the budget is with a Constitutional amendment requiring us to do so,” said Senator Graham. “South Carolina has a balanced budget amendment in our state constitution that serves us well. Requiring the state legislature and governor to make difficult spending decisions -- not pass the buck on to future generations -- is an important, but necessary responsibility. Now is the time for Congress to do likewise.

That list contains 11 senators who back a Balanced Budget Amendment. We can safely add Rand Paul, and Marco Rubio to the list.

Case for Compromise

Senator DeMint should capitalize on this opportunity and renew his effort for a balanced budget amendment.

The immediate problem however, is that earmarks are a drop in the bucket. Eliminating all of them will not put a dent in the deficit. To tackle the deficit we need to look at all spending including military and entitlements. We also need to eliminate entire departments such as the department of energy and education.

The US can no longer afford to be the world's policeman with troops in 140 countries. It is time for Republicans to admit that simple fact and do something about it.

My plea to Republicans is to compromise. Cut some military spending in return for cutting some entitlement spending.

To stimulate the economy we desperately need to get rid of public union collective bargaining and scrap Davis Bacon. Whatever the Democrats want in return for ending collective bargaining and Davis Bacon would be worth it, even some extra short-term stimulus.

I am calling on Senator DeMint and Rep. Ron Paul to introduce new measures to kill Davis Bacon and public union collective bargaining. The time is now.

More Scrutiny of Fed Coming

Bloomberg reports Bernanke Faces More Scrutiny After Republican Gains

With Republicans reclaiming a majority in the House of Representatives and eroding Democrats’ hold on the Senate, Tea Party candidates who campaigned in part against the Fed get an opportunity to call Bernanke to task for taking part in the unpopular financial rescues that helped propel them to office.

“There’s certainly going to be more hearings and more pressure,” said Mark Calabria, a former Republican Senate Banking Committee aide who is now director of financial- regulation studies at the Cato Institute, a policy research group in Washington that favors free markets.

One new Fed opponent in Congress is Kentucky Senator-elect Rand Paul, who has criticized the Fed for imposing “the sneakiest tax of all -- inflation.” He joins South Carolina’s Jim DeMint, an advocate for Tea Party candidates who backed an unsuccessful bill to subject the Fed’s monetary policy to congressional audits.

Bernanke argued that audits of monetary policy would compromise the independence of the central bank. A letter he sent to DeMint in May warned that audits would “seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation.”

Ultimate Irony

Please note the irony in Bernanke's letter to Senator DeMint. Bernanke said audits would “seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation.”

Bernanke is both a liar and a buffoon. He is a liar because he said he would not monetize the national debt and that exactly what QEII does. He is a buffoon because it cannot possibly accomplish the stated goals as noted in Three Reasons QEII Will "Backfire"; Pavlov's Dogs and the "No Choice" Argument Yet Again.

Moreover QEII has annoyed our trading partners as noted in South Korea, Hong Kong, Brazil, China, Volcker Complain about Bernanke's QE Policy.

The ultimate irony is Bernanke had the gall to preach to Senator DeMint about rising inflation expectations when that is exactly what Bernanke is foolishly attempting to do.

We do not need to Audit the Fed, we need to Abolish the Fed.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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