Federal Reserve Chairman Ben Bernanke testified before Congress on Tuesday and gave little cause, if any, for celebration. “It would (allowing the tax cuts to expire) probably knock the recovery back into a recession and cost a lot of jobs, and would greatly delay the recovery that we’re hoping to facilitate,” said Bernanke at the end of two hours of testimony Tuesday before the Senate Banking Committee, according to the Associated Press.
If nothing is done before the end of the year the recovery could fall into a financial abyss and “a lot of job” could be lost, the Fed chairman told the Senate committee. Further, such a setback might trigger an increase in interest rates, and cascade the U.S. economy into a European melt down.
According to Bernanke, the U.S. economy is weakened in recent months, causing a gloomy outlook for the months and years ahead. So, what does lie ahead?
“If Congress doesn’t take action by the end of the year, a package of tax cuts adopted during George W. Bush’s administration expire while deep spending cuts kick in. If that happens, the economy would go over a ‘fiscal cliff,’” the AP reported.
Where is the problem? Republicans want the Bush-era tax cuts to become permanent for all taxpayers and they want deeper spending cuts. Democrats are willing to concede the Bush tax cuts, but have not been willing to extend the cuts to wealthy Americans.
“Congress is in charge here, not the Federal Reserve,” Bernanke said.
That said, as Bernanke was getting ready to leave the committee room, Sen. Charles E. Schumer—D-N.Y., said, “Given the political realities of this year’s election, I believe the Fed is the only game in town. I would urge you, now more than ever, to take whatever actions are warranted.”
“So get to work, Mr. Chairman,” Schumer added.
Excuse me Senator, weren’t you listening? Congress is responsible for taking action before the meltdown occurs, not Bernanke. So, Senator, get to work!