Bernanke: "We Must Not Repeat Mistakes Made During the Financial Crisis"... Emphasizes Expanded Fiscal Policy to Congress

[Asia Economy Reporter Jeong Hyunjin] Ben Bernanke, former chairman of the U.S. Federal Reserve (Fed) during the 2008 global financial crisis, emphasized that in responding to the economic recession caused by the novel coronavirus (COVID-19), mistakes made during the financial crisis must not be repeated, and that Congress must firmly support expansive fiscal policies.

On the 15th (local time), Bernanke expressed these views in an op-ed titled "I Was Fed Chairman. Save the States," published in The New York Times (NYT), stating that additional support for state and local governments under the Coronavirus Aid, Relief, and Economic Security (CARES) Act must be provided before this summer ends.

Bernanke noted that the COVID-19 pandemic has caused an economic recession with shocking speed and intensity, and that the measures taken by the public and private sectors over the coming months will affect the economy and public health for years to come.

Bernanke said, "While assisting with preparations for the effective reopening of economic activities in New Jersey, I clearly realized that the responsibility for responding to COVID-19 does not rest solely with local governments or the 50 state governments," adding, "Congress must respond decisively and, in particular, must not repeat the mistakes made during the Great Recession following the global financial crisis."

He pointed out, "State governments provide health, public safety, education, and public transportation services and are also major employers. Since March, economic activities have been shut down to prevent the spread, resulting in billions of dollars in lost tax revenue," warning, "This could lead to cuts in essential services and massive layoffs."

Bernanke also noted, "During the global financial crisis, Congress passed an $800 billion stimulus package, but reductions in investment and employment by state and local governments partially offset its effects," and added, "Federal austerity policies combined with budget cuts by state and local governments significantly slowed the pace of economic recovery."

In response to concerns about the economic recession caused by COVID-19, the U.S. prepared a $2.2 trillion stimulus package in March. Bernanke stressed, "State and local governments urgently need additional federal support before the assistance under the CARES Act ends this summer," emphasizing, "The CARES Act allocates $150 billion to support state and local governments, but the new support package must be substantially larger."

Furthermore, he stated, "The new support package should continue to provide aid to state and local governments and stimulate investment in the unemployed, healthcare, households, and businesses," adding, "To provide essential services to citizens and avoid massive budget and employment cuts that would drag down the economy, state and local governments need more federal assistance."

This content was produced with the assistance of AI translation services.