After reading in the Fed meeting minutes the other day that some
members of the central bank are having second thoughts about their ongoing
$85 billion per month money printing program, it occurred to me that, since
Congress has an $85 billion per year “sequester” problem, maybe these two
should work together.
Maybe the Fed should stop buying mortgage-backed securities and
long-dated Treasuries just for one month and, instead, have that newly
printed money directed to the parts of government that will otherwise suffer
layoffs and cutbacks when the March 1st “sequestration” cuts go into effect.
Let the Defense Department and all the affected government agencies
establish an account at the Federal Reserve and, as is done with the nation’s
big banks, Ben Bernanke can just credit their accounts with the amount of
money that won’t otherwise be available this year due to sequestration –
about $85 billion.
Then they can just keep
on doing what they’ve been doing and everybody wins!
That way, hesitant Fed hawks could rest easy for a month with the
knowledge that 1/12th of the Fed money printing scheduled for 2013 won’t be
feeding asset bubbles in such areas like junk bonds, farmland in Iowa, and
mortgage REITs.
Rather, the money will go directly toward keeping the nation’s defense
strong and to keep firefighters and other first responders on the payroll for
the rest of the year while also keeping the national parks open.
As it turns out, $85 billion is just a drop in the bucket for the Fed,
but, as we’ve all learned in recent weeks, the $85 billion in budget cuts are
going to inflict all sorts of pain on the American public, at a time when a
weak economic recovery is gathering strength.
Surely the Fed doesn’t want to see the U.S. economy relapse due to
some squabbling on Capitol Hill.
The Republicans will be happy because government spending will have
been cut and the Defense Department won’t have to mothball any ships while
the Democrats will rest easy in the knowledge that there will be no furloughs
of non-defense federal workers.
Meanwhile, the budget deficit will be reduced, the Congressional
Budget Office might finally stop harping on the White House to take the
nation’s debt more seriously, and the credit rating agencies can all remove
their “negative outlooks” on U.S. credit.
Maybe Standard & Poor’s will even restore our Triple-A rating.
I don’t know why somebody else hasn’t come up with this idea already.
What’s not to like about this?
