Newspaper article Roll Call

Biggest Threat to U.S. Economy Is Congress, Bernanke Says

Newspaper article Roll Call

Biggest Threat to U.S. Economy Is Congress, Bernanke Says

Article excerpt

Congress is the main impediment to a more robust economy, Ben S. Bernanke told Congress today in what may well be his swan song on Capitol Hill.

What's more, lawmakers are on course to make things worse before the end of the year, the custodian of monetary policy warned the caretakers of fiscal policy.

"The economic recovery has continued at a moderate pace in recent quarters despite the strong headwinds created by federal fiscal policy," was the substantive opening line of his testimony to the House Financial Services Committee.

In the next breath, the chairman of the Federal Reserve worried that the House and Senate are contemplating additional austerity measures this year that would curb the expansion even more.

"The risks remain that tight federal fiscal policy will restrain economic growth over the next few quarters by more than we currently expect, or that the debate concerning other fiscal policy issues, such as the status of the debt ceiling, will evolve in a way that could hamper the recovery," he said.

Bernanke was pointing to one of the under-appreciated realities of the congressional budget discussion ever since Republicans took control of the House three years ago. The parameters of the debate don't include any discussion of an expansionary fiscal policy -- one in which large amounts of federal spending and low rates of taxation give the economy plenty to grow on.

That was Washington's collective approach during the economic crisis of the previous decade, but now the opposite is the case. President Barack Obama, congressional Democrats and the Hill's GOP are all unified in their calls for a contractionary approach -- one that puts a premium on reducing the size of annual deficits and chipping away at the national debt.

Where the profound disagreement comes is over which way to accomplish the contraction. …

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