GOP Rep. Garrett to Moneynews: Fed Is in Unchartered Territory

Friday, 05 Apr 2013 07:32 AM

By Glenn J. Kalinoski and David Nelson

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History provides no example regarding the expansion of the Federal Reserve’s balance sheet, according to U.S. Rep. Scott Garrett.

“The Fed’s balance sheet has grown multiple times from when [Chairman Ben Bernanke] took the reins,” Garrett told Newsmax TV in an exclusive interview.

The New Jersey Republican went on to say that most of the experts on Wall Street that he talks to say they can't anticipate one of two things: that Bernanke unwinds it in an appropriate manner; and that he does so despite the tremendous political pressure on the Fed when the unwinding occurs.

Watch our exclusive video. Story continues below.



He outlined a scenario in which unemployment falls, the economy improves and gross domestic product (GDP) accelerates from its current “anemic” pace.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

“That’s when the Fed will say, ‘OK. It’s appropriate for us to start [unwinding],’” Garrett said. “But that’s just at the moment that members of Congress will be hearing from their constituents back home [saying], ‘Don’t tighten the credit market. Now is not the time to reign in liquidity on the marketplace.’”

Garrett said at that point, Congress, the public and Wall Street will pressure the Fed to not do anything and keep current policies in place.

“Will [Bernanke] be able to stand up for that? Garrett asked. “Time will only tell.”

The sequester and the debt limit increase were also addressed by Garrett.

“I did not support the last debt limit increase … because that is where we said, ‘Well, if we didn’t actually cut the money right away, we could go into something called a sequester.’ That was the president’s idea. I don’t think that would be the best way to go because you’re taking a meat-cleaver approach to cutting as opposed to a scalpel approach.”

Garrett also discussed a proposal that would give states the choice of opting out of the federal transportation program, allowing them to keep approximately 18 cents per gallon in gasoline taxes that currently go to Washington.

“We’d probably, at the same time, raise our own gasoline tax in the state to make up for the difference so … we wouldn’t see any difference at the pump,” he said.

“New Jersey, New York, California, whoever opts out, would be in control of their own destiny. Local politicians would no longer be coming to Congress seeing me, tin cup in hand, asking [for their] money back," he said.

"They’d be keeping all of that money and they would be in direct control and you’d be seeing improvements in the streets … because it would be controlled locally and most efficiently.”

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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