Entries in Capitol Hill (2)


Ben Bernanke Warns Congress on ‘Taxmageddon’

Chip Somodevilla/Getty Images(WASHINGTON) -- Federal Reserve Chairman Ben Bernanke warned Capitol Hill today that any modest gains the economy is making could all be lost if Congress doesn’t take action to avert the so-called “taxmageddon” by the end of the year.

“As is well known, U.S. fiscal policies are on an unsustainable path,” Bernanke told the Senate Banking Committee. “The most effective way that the Congress could help to support the economy right now would be to work to address the nation’s fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery.”

Congress is facing a year-end “fiscal cliff,” the intersection of several tax provisions — notably, the expiration of Bush-era tax cuts, $1.2 trillion in automatic spending cuts because of the sequester and expiring payroll tax breaks, which, if not addressed, could cost American taxpayers $310 billion in tax increases next year.

“Recovery could be endangered by the confluence of tax increases and spending reductions that will take effect early next year if no legislative action is taken,” Bernanke said.

But as leadership from both sides of the aisle continue to wage an increasingly polarized battle over taxes, Sen. Chuck Schumer, D-N.Y., today urged the Federal Reserve on measures to take economic recovery into its own hands.

“The bottom line is very simple: We’re not going to get the fiscal relief we want, at least over the next short while,” Schumer said. “Given the political realities, Mr. Chairman, particularly in this election year, I’m afraid the Fed is the only game in town.”

Bernanke testified on Capitol Hill to deliver his semiannual report, painting a picture of slowing job growth, tepid manufacturing rates and weakened progress on the housing market in the second-quarter of 2012. The U.S. economy has continued to recover, he said, but growth indicators are moving at a pace that he called “disappointing.”

While the unemployment rate has fallen about a percentage point since late 2011, average growth in payroll employment has dwindled to 75,000 per month, down from 200,000 then. Bernanke said jobs related to the warm weather last winter might be to blame for some — but not all — of the languid jobs momentum.

The housing sector is seeing “moderate” growth, he said, with construction and home sales gradually increasing, thanks to unprecedentedly low mortgage rates. But factors like tough lending standards for would-be buyers, plus an abundance of vacant or foreclosed homes, continues to hamper growth.

Bernanke projected unemployment rates would remain at 7 percent or higher until the end of 2014, with the GDP growing at a lower-than-expected pace of 2.2 to 2.8 percent in the next year.

He indicated the Federal Reserve is willing to take action to avert a second financial crisis but would not elaborate on possible plans or a timeline for implementation.

“We will evaluate our options going forward,” he said, adding that it’s important to weigh the costs and risks associated with some non-conventional measures to spur economic growth. “If we are not getting sustainable improvements, we’ll have to seriously consider taking additional action.”

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Copyright 2012 ABC News Radio


Bernanke: Fed Prepared to Do More if Recovery Stalls

Alex Wong/Getty Images(WASHINGTON) -- Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that the central bank is prepared to take additional action if the economy does not pick up.  

"Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation," Bernanke told the House Financial Services Committee.

"However, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium-term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate."

In addressing why the economic recovery seems slow, Bernanke told Congress that the factors contributing to the slow recovery are likely temporary.

"Notably, the run-up in prices of energy, especially gasoline, and food has reduced consumer purchasing power. In addition, the supply chain disruptions that occurred following the earthquake in Japan caused U.S. motor vehicle producers to sharply curtail assemblies and limited the availability of some models,” he said.  

The chairman warned Congress that sharp federal budget cuts in the short-term could negatively impact the economic recovery.  But, Bernanke said the $4 trillion over 10 year deficit proposal President Obama and congressional leaders have discussed could do the U.S. some good.

"It has the advantage -- if it can be done -- it has the advantage that it will stabilize the ratio of our debt to GDP, and that would be a very encouraging development," he said.

Bernanke pushed lawmakers to use the debate over raising the debt ceiling as a chance to address the long-term sustainability of government spending.   

"As I've argued, we need both an increase in the debt limit, which will prevent us from defaulting on obligations which we've already incurred in which would create tremendous problems for our financial system in our economy, but we also need of course to take a serious attack on the unsustainable of our fiscal position. I think both of those things can be accomplished," said Bernanke.

Asked what Congress can do to put Americans back to work, Bernanke steered clear of endorsing specific programs, but said lawmakers should try to address unemployment through job training programs.  He also said they should take a serious look at what they can do to boost the housing market as well as modifying the tax code.

Bernanke warned lawmakers about the danger of long-term unemployment. "What's particularly bad about it is so many people have been out of work so long, it's going to be hard to get them back to anything like the kind of jobs they had when they lost their jobs back in the beginning of the recession." 

Bernanke was on Capitol Hill presenting his semi-annual monetary policy report.  

Copyright 2011 ABC News Radio

ABC News Radio