As Warren, Sanders urge fracking ban, Fed chief warns of consequences
Federal Reserve Chair Jerome Powell on Wednesday said it would likely hurt the U.S. economy if the federal government were to ban fracking, an idea proposed by Sens. Elizabeth Warren, Bernie Sanders and several other 2020 Democratic presidential contenders.
“To shut down the shale industry, yeah, that would probably not be a good thing for the economy,” Powell said in testimony before lawmakers on the Joint Economic Committee.
The Fed chief, who has worked to remain apolitical in the face of constant attacks from President Donald Trump, tried to steer clear of the election in his testimony. Sen. Ted Cruz (R-Texas) asked him about the potential effect of a “massive tax increase” on the economy, including a wealth tax specifically.
“I’m pretty reluctant to be pulled into the 2020 election, if you will forgive me,” Powell responded. “I honestly don’t want to get into that business.”
Cruz then switched gears, pointing to a previous statement by former Fed Chairman Ben Bernanke that had underlined the benefit of the shale revolution for the U.S. economy and asked Powell if he agreed, as well as what the effect of a ban on hydraulic fracturing might have on growth.
“I would certainly agree,” he said. “The energy independence of the United States is something that people have been talking about for 50 years and I never thought it would happen, and here it is. … It’s a great thing.”
“That’s not to say there aren’t issues to manage — environmental issues, all kinds of other issues — but it’s been a great thing for the country,” he said.
While coal production has been declining for a decade, the advent of fracking and advances in drilling have driven oil and gas production to record levels and turned the U.S. into the world's largest producer of the fuels.
Warren (D-Mass.) and Sanders (I-Vt.), both frontrunners for the Democratic nomination, have called for a nationwide ban on fracking because of its negative environmental impact. They have also proposed a wealth tax on the richest Americans.
On a separate political front, Powell maintained his policy of not commenting directly on Trump, but he pushed back strongly on the president’s new favored Fed policy — interest rates below zero. “Give me some of that money,” Trump said in a speech Tuesday at the Economic Club of New York.
Powell said negative interest rates, an extreme stimulus measure, don’t make sense for economic conditions in the U.S.
“Our economy is in a strong position,” he said. “We have growth. We have a strong consumer sector. We have inflation that’s a bit below [our 2 percent] target.”
“The very, very low and even negative interest rates that we see around the world would not be appropriate for our economy,” he added. “We tend to see negative rates in the larger economies at times when growth is quite low and inflation is quite low. That’s just not the case here.”
He also repeated that the Fed does not take political factors into account in its decisions. “We look exclusively at the data, at the research, and at the performance of the U.S. economy,” he said.
