Bernake Warns of 'Two Societies'

[Havakasha]

It seems that S&L doesnt think its a problem

In Interview, Bernanke Backs Tax Code Shift
By SEWELL CHAN
Published: December 5, 2010

WASHINGTON — The Federal Reserve chairman, Ben S. Bernanke, said in an interview broadcast on Sunday evening that rising inequality was eroding social cohesion and that Congress could help economic growth by making the tax code more efficient.
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The statements, in an interview with “60 Minutes” on CBS, were a rare foray outside the strict boundaries of the Fed’s mandate, to which Mr. Bernanke has typically confined his remarks.

In the interview, which was taped last week during a visit to the Ohio State University, Mr. Bernanke was unusually blunt in defending the Fed’s decision last month to inject $600 billion into the banking system to jolt the flagging recovery.

“This fear of inflation, I think, is way overstated,” Mr. Bernanke said. “We’ve looked at it very, very carefully. We’ve analyzed it every which way.”

On fiscal policy, a topic he has largely avoided, Mr. Bernanke repeated his point that the government should avoid an immediate contraction that could jeopardize the fragile recovery, while at the same time starting to address “the long-term structural budget deficit.”

But he went slightly further when asked how Congress might help the economy grow.

“The tax code is very inefficient — both the personal tax code and the corporate tax code,” Mr. Bernanke said. “By closing loopholes and lowering rates, you could increase the efficiency of the tax code and create more incentives for people to invest.”

That statement seemed to be an endorsement of one proposal from the fiscal commission appointed by President Obama. Among the ideas it put forward last week was reducing personal income tax rates but eliminating a number of popular deductions.

When asked about rising inequality in the United States, Mr. Bernanke offered a response that was likely to be embraced by liberals.

“It’s a very bad development,” he said. “It’s creating two societies. And it’s based very much, I think, on educational differences. The unemployment rate we’ve been talking about. If you’re a college graduate, unemployment is 5 percent. If you’re a high school graduate, it’s 10 percent or more. It’s a very big difference.”

Mr. Bernanke added: “It leads to an unequal society, and a society which doesn’t have the cohesion that we’d like to see.”

During the interview, Mr. Bernanke reiterated his view that a double-dip recession was unlikely, but added, “We’re not very far from the level where the economy is not self-sustaining.”

The chairman also left open the option of going beyond the $600 billion of Treasury securities the Fed plans to buy through June 2011.

“It’s certainly possible,” Mr. Bernanke said, adding: “It depends on the efficacy of the program. It depends on inflation. And finally, it depends on how the economy looks.”

Mr. Bernanke offered a retort to critics, saying, “We’re not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way.”

Mr. Bernanke’s remarks suggested that the Fed was highly unlikely to change course when it meets on Dec. 14 for the final time this year.

The Fed has made it clear that its implicit long-run target for inflation is around 2 percent or slightly less, and Mr. Bernanke said that “we’ve been very, very clear that we will not allow inflation to rise above” that level.

[SiriuslyLong]

“The tax code is very inefficient — both the personal tax code and the corporate tax code,” Mr. Bernanke said. “By closing loopholes and lowering rates, you could increase the efficiency of the tax code and create more incentives for people to invest.”

That statement seemed to be an endorsement of one proposal from the fiscal commission appointed by President Obama. Among the ideas it put forward last week was reducing personal income tax rates but eliminating a number of popular deductions.-------


I'm all for that.

In regards to the HS graduates unemployment, we need to make things here in the US. I've said this before. The mass exodus of jobs to China, Mexico... is the biggest policy failure of our government EVER. The repukes say it makes us more competitive in the long run, and I'm calling BS on that. We have people that need to do something - take pride in making something.

[Atypical]

Why would business do that? It is not in their "financial" interest. Which is their ONLY reason for existence.

Altruism is what you want? Never happen.

Cheap, cheap, cheap, cheap, more profit, more profit, more profit, cut wages, cut wages, layoff people, layoff people...

Get the money!

[SiriuslyLong]

Why would business do that? It is not in their "financial" interest. Which is their ONLY reason for existence.

Altruism is what you want? Never happen.

Cheap, cheap, cheap, cheap, more profit, more profit, more profit, cut wages, cut wages, layoff people, layoff people...

Get the money!

I understand the purpose of a corporation. I'm talking about "government policy" or the lack thereof. We have the people. We have the skills. I would like to think someone in government has some ideas to get American's PRODUCING goods.

I still think our government could learn a lesson from corporate America in terms of doing more with less (efficiency).

[Atypical]

"I would like to think someone in government has some ideas to get American's PRODUCING goods."

You're naive. It's the pressure brought by business on government in the name of our cherished capitalism and all that word implies that caused the outsourcing.

Don't you understand the excitement that the words "free trade" cause. I know of people who orgasm when considering that "opportunity".

That's the power I talk about! Getting government to grease the way of business to exploit powerless foreign workers who make nothing and work in appalling conditions. And who cares how many Americans that change displaces. They're EXPENSIVE.

Those are new markets don't ya know! And the profits we're going to make are...(orgasm)

"I still think our government could learn a lesson from corporate America in terms of doing more with less (efficiency)."

In science if something is shown to be wrong even once a hypothesis is flawed. I have one word for you - ENRON. You have a strange romantic view of business. Yes, some are efficient, many are not. It is the human factor that makes it work or not work; makes it smooth or coarse.

Perhaps you haven't noticed - both government and business are run by...wait...people.

If you and everyone else looked at business and government the same way and were appropriately critical of both while understanding the needs of both conversation would be a lot easier - except for the ideologues.

[SiriuslyLong]

Well, if I'm naive, then you are most certainly cynical, and you appear to orgasm quite easily. I hope you have some tissues handy to clean up the mess.

ENRON is an exception. Please. I'm sure there are exceptions in regards to the government (like they blew $120 MM printing bad $100 bills).

I just watched a Peter Schiff interview. He was talking about "rebuilding" the economy before the interviewer switched him to Bernake's comments on the tax system. Schiff talked about ELIMINATING corporate taxes. He cited an alternative, but I didn't catch that. What would that to for business and jobs? Nothing? The CEO's will just pocket the money? The naive in me says that investment in the US would increase.

He also suggested eliminating income tax and replacing it with a consumption tax and / or national sales tax. Did you see my post the other day? I'd have ~$22,000 more in my accounts - that is if I didn't spend it on something.

I don't have a strange, romantic view of business. As I have said many times, business employs me, provides me retirement savings and various benefits. There is nothing romantic about it. In fact it is very practical.

The issue is getting everyone employed by business such that business has to compete for the best employees.