Anyone looking for some tangible policy prescriptions from Federal Reserve Chairman Ben Bernanke's opening remarks at the Kansas City Fed's Jackson Hole symposium will be sorely disappointed.
Oh, there were policy prescriptions all right -- mostly for the folks who set tax and spending policy. Bernanke recommended a "better process" for making fiscal decisions, including transparent budget goals and enforcement mechanisms. (Compared with the debt-ceiling free-for-all, anything looks like a process.)
As for monetary policy, which many analysts have called the only game in town because of budgetary constraints, Bernanke had little to offer: We have tools for additional stimulus, we don't know whether we'll use them, and we'll talk more about it at our next meeting September 20-21. That session was planned originally as a single-day affair; the addition of an extra day fanned new hopes that the toolbox was being readied for action.
One tool was put into operation at the Aug. 9 policy meeting: "forward guidance." The Fed pledged to keep the benchmark rate near zero at least through mid-2013. The yield on the two-year Treasury note dropped a mere 7 points in response, suggesting Mr. Market had already figured that out.
The first half of Bernanke's speech was a walk down memory lane. He reminded us how we got here (the worst financial crisis since the Great Depression); and why we're stuck here (housing, the usual cyclical leader, is still flat on its back).
The second part was devoted to the future. Bernanke thinks the U.S. still has the unique combination of forces that have allowed it to thrive in the past -- a market economy, an entrepreneurial culture, flexible labor and capital markets and technological innovation. Restoring the economy to its long-run growth potential will require stabilizing the debt relative to national income and enacting tax and spending policies that create incentives to work and invest.
Back to you, President Obama.
(Caroline Baum is a Bloomberg View columnist.)