TOPEKA, Kan. — The president of the Federal Reserve bank in Kansas City, Mo., said Monday that the United States must make significant reforms, including reviving the manufacturing sector, to restore confidence in the economy.
Thomas Hoenig made his remarks to members of Kansas Gov. Sam Brownback’s administration, bankers and legislators in Topeka.
Hoenig said decades of lost manufacturing jobs, rising debt and long-term obligations have put the nation’s economy and future at risk. He said the United States needs to create a climate to promote manufacturing more goods that the world demands.
“You don’t create jobs, you create an environment to create jobs,” Hoenig said.
He said the United States had become too dependent on consumer spending to drive growth, but that has slowed as consumer debt increases and savings rates decline to near zero, eliminating any ability to invest capital.
Hoenig said Washington policies alone would not revive the economy, such as providing short-term stimulus packages or adjusting monetary policies with increased regulations.
“Congress can’t solve this problem. This is a societal problem,” he said. “If we continue to borrow more than we can afford, then all the wealth is paid in interest.”
Hoenig has headed the regional bank since 1991. In recent years, Hoenig has opposed the Federal Reserve’s efforts to boost the economy through an extended period of low interest rates and the purchase of billions of dollars in Treasury securities, a policy known as quantitative easing.
He said further Fed actions could kindle inflation and put additional pressures on a struggling economy.
“Inflation is a tax on the American people,” Hoenig said.
He said companies that have capital they want to invest are holding off because of the regulatory uncertainty as Washington prepares to write new rules for doing business.
