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Saturday, May 09, 2009

The "Apparent Abdication of Responsibility"

Tyler Cowen says congress is letting others take the responsibility - and the potential blame - for decisions it ought to be making:

There’s Work to Be Done, but Congress Opts Out, by Tyler Cowen, Economic View, NY Times: The longer the financial crisis runs, the more policy makers at the Treasury, the White House and the Federal Reserve are working around Congress rather than with it. It’s not that anyone is behaving illegally or unconstitutionally, but rather that Congress seems to want to be circumvented and to delegate more power to the executive branch as well as to the Fed, at least temporarily.

While Congressional leaders are consulted on the major policies, Congress is keeping its distance, perhaps to minimize voter outrage. This way, Congress can claim credit if a recovery comes, but deny responsibility if the price tag ends up higher than advertised or if banks seem to be receiving unfair benefits from the government.

Trillions of dollars of financial commitments have been made without explicit Congressional approval. ... The traditional division of labor among policy makers was that the Fed determined the quantity of money in the economy — it set monetary policy — and Congress decided precise government expenditures — it handled fiscal policy. These new programs blur that distinction and, in essence, the Fed is running some fiscal policy. ... A full description of important financial policies handled outside of Congress would more than fill this column and would add up to trillions of dollars in potential commitments and guarantees.

Many economists are happy to see technocrats play such a big role in the current emergency in the belief that the Obama administration and the Fed have more economic expertise — and more incentives to care about policy at the national level — than Congress does. But if that is true, we should be nervous about the future. A Congress that won’t accept much responsibility for the financial bailouts, for example, is unlikely to rise to the occasion when the time comes to make tough decisions on the budget. ...

Both Democrats and Republicans are at fault for this apparent abdication of responsibility. The Republicans are focused on blaming the Democrats for bailouts, since they know the policies can go through without their support. The Democrats want to enjoy the benefits of making commitments and guarantees without accepting accountability or responsibility for them.

It's a common theme in American history that crises expand the power of the executive branch of government, and that is part of what is happening here. Even the Federal Reserve, which ... is supposed to be quasi-independent, has ceded much of its power to the Treasury. ... Just as the Bush administration brought a growth of executive power in foreign policy and surveillance, so executive power has grown when it comes to economic policy; that development spans the administrations of both Mr. Obama and George W. Bush.

On any single policy, the abdication of Congressional responsibility may not be a problem. Sometimes it is good to let the technocrats have their way. In the longer run, though, the United States requires a Congress courageous enough to accept responsibility for potentially unpopular policies. We are moving further away from that every day.

    Posted by on Saturday, May 9, 2009 at 12:29 PM in Economics, Fiscal Policy, Monetary Policy, Policy, Politics | Permalink  TrackBack (0)  Comments (17)

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