Congress needs to bite the bullet

There’s Work to Be Done, but Congress Opts Out, by Tyler Cowen, Economic View, NY Times

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.

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