Fischer: Right policies out of Washington could boost economy

A top Federal Reserve official is eager for Congress and the White House to pursue new policies — to a certain point.

Stanley Fischer, the Fed’s vice chair, argued Monday that the possibility of new fiscal policy out of Washington could help boost the U.S. economy after years of gridlock.

{mosads}However, he stopped short of endorsing any particular policy course, and even expressed concern that a GOP-controlled Washington could take steps in the wrong direction.

Speaking before the Council on Foreign Relations, Fischer reiterated a long-lasting Fed gripe, which is that its efforts to steer the economy through monetary policy have their limits, and policymakers have done little to help on the fiscal side.

“For many years, the Fed has been close to the only game in town,” he said. “Macroeconomic policy does not have to be confined to monetary policy. It was the only game in town because the others didn’t even want to play.”

Fischer contended that some combination of spending on infrastructure, improved education and steps to boost private investment in the economy could all help boost a U.S. economy that has solidly recovered from the financial crisis, but still seems to have room to grow.

But while Fischer appeared eager to welcome some new policymaking out of Washington, he was not nearly as excited about the prospects of some other Republican policy goals.

In particular, Fischer was less enthused about Republican efforts to roll back significant portions of the Dodd-Frank financial reform law. President-elect Donald Trump has said he would like to dismantle the law, arguing it is holding back the economy.

The Fed was given significant new powers under that 2010 law, and Fischer argued that policymakers and those pushing for relaxed rules may be forgetting the dire depths of the financial crisis.

“Many of us feared that … what we were seeing at the end of 2008 was the beginning of the second Great Depression,” he said. “It’s amazing to me, eight, nine years after, we seem to have forgotten. Speak to people in the financial sector, and it’s as if nothing happened. But something happened.”