Newspaper article The Christian Science Monitor

Federal Reserve Chief Tells Congress: You're Making Weak Economy Worse

Newspaper article The Christian Science Monitor

Federal Reserve Chief Tells Congress: You're Making Weak Economy Worse

Article excerpt

Federal Reserve Chairman Ben Bernanke said Wednesday that the US economy needs more help from the fiscal policies that Congress controls, not just from the Fed's own stimulus efforts.

He said that the economy faces "strong headwinds created by federal fiscal policy," and he said this "makes a big difference" in terms of jobs and the unemployment.

Appearing at a congressional hearing, Chairman Bernanke said that Congress's moves to pare back on tax cuts and federal spending are reducing the pace of economic growth by about 1.5 percentage points. For reference, the economy was growing by about 1.8 percent in the year's first quarter.

Bernanke said an extra 1.5 percentage points of growth could add as many as 750,000 new jobs and bring the unemployment rate from 7.6 percent to 6.9 percent.

His words represent a pointed message at a time when economic growth is weak, the Fed has been struggling to bring the jobless rate down, and Congress has shifted from stimulus efforts to focus on bringing down federal deficits.

Bernanke didn't say Congress should start ignoring federal deficits to launch a massive new stimulus effort. But he said the need for fiscal discipline to avoid an unsustainable buildup of national debt can be addressed for the long term without imposing severe tightening this year.

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"My suggestion to Congress is to consider policies that involve somewhat less restraint in the near term," he said, adding later that in his view Congress has failed so far to address long run issues such as entitlement reform.

The US economy has continued to grow this year, according to government data, despite tax hikes that took effect in January and automated spending cuts in many federal programs (known as the "sequester") that began taking effect in April.

But growth has been tepid. The 1.8 percent growth rate in the first quarter could be followed by a second-quarter pace of 0. …

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