No surprise, it's Kansas City Fed President Thomas Hoenig. Recap of yesterday's 4 hour hearings from the Peterson-Pew Commission on Budget Reform, with Hoenig, Rivlin and several others. Video included (at bottom of story).
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Peterson-Pew Commission on Budget Reform >>
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Full C-Span coverage:
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Feb. 16 (Bloomberg) -- Federal Reserve Bank of Kansas City President Thomas Hoenig said the U.S. must take “difficult” steps to reduce spending and increase revenue so the central bank isn’t pressured to fund the “unsustainable” federal debt.
“It is a fact that the current outlook for fiscal policy poses a threat to the Federal Reserve’s ability to achieve its dual objectives of price stability and maximum sustainable long- term growth, and therefore is a threat to its independence as well,” Hoenig said today in a speech in Washington.
The Obama administration estimates budget deficits will total $4.3 trillion during the next five years and hit a record $1.6 trillion in the year ending Sept. 30. The U.S. must be “willing to disappoint a host of special interests” and tackle the debt, or it risks “its own next crisis,” Hoenig said.
“A government faced with rising debt levels must provide a credible long-term plan to re-establish fiscal balance,” Hoenig said in remarks at a policy forum hosted by the Peterson-Pew Commission on Budget Reform.
Hoenig said the plan should include “controlling budget earmarks, trimming subsidies to numerous economic sectors and resolving our banking problems and the perception that Wall Street is favored over Main Street, all of which would otherwise foster mistrust and cynicism among the public.”
Responding to audience questions, Hoenig said the Fed’s “primary goal” now is executing its “exit strategy” from a record credit expansion in a way that “doesn’t cause harm.”
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The US must fix its growing debt problems or risk a new financial crisis, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, warned on Tuesday, adding a mounting deficit could spur inflation.
Mr Hoenig said that rising debt was infringing on the central bank’s ability to fulfil its goals of maintaining price stability and long-term economic growth. “Stunning” deficit projections were putting political pressure on the Fed to keep interest rates low, infringing on its independence at the risk of inflation, he said.
The hawkish Kansas Fed president also warned against “dire” consequences of the central bank prolonging its holdings of mortgage-backed securities, which it purchased in an effort to prop up the US housing market. Mr Hoenig painted a picture of a slippery slope, where a less independent Federal Reserve was asked to find ways to support other ailing sectors, such as agriculture.
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Video: Peterson-Pew Commission on Budget Reform