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Bernanke warns 'fiscal cliff' may undo Fed's stimulus moves
Source: Agencies |
December 14, 2012, Friday
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FEDERAL Reserve Chairman Ben Bernanke warned that none of the actions being taken by the Fed to stimulate the US economy could outweigh the economic pain that would be caused by sharp tax increases and government spending cuts that are set to kick in next month, as a standoff between US President Barack Obama and Republican lawmakers continues.
But Bernanke said the Fed believes the crisis will be resolved without significant long-term damage.
"Clearly, the fiscal cliff is having effects on the economy," with the uncertainty leading businesses to cut back on investment, Bernanke said.
The Fed's latest forecasts for stronger economic growth next year and slightly lower unemployment assume that none of the spending cuts and tax increases involved in the so-called "fiscal cliff," will come to pass.
But if the issue is not resolved before the December 31 deadline, the Bush-era tax cuts will expire and across-the-board spending cuts take effect in January, something economists predict would send the US back into a recession.
Bernanke said the most helpful thing that Congress and the Obama administration can do is to resolve the issue fast.
But Bernanke said the Fed believes the crisis will be resolved without significant long-term damage.
"Clearly, the fiscal cliff is having effects on the economy," with the uncertainty leading businesses to cut back on investment, Bernanke said.
The Fed's latest forecasts for stronger economic growth next year and slightly lower unemployment assume that none of the spending cuts and tax increases involved in the so-called "fiscal cliff," will come to pass.
But if the issue is not resolved before the December 31 deadline, the Bush-era tax cuts will expire and across-the-board spending cuts take effect in January, something economists predict would send the US back into a recession.
Bernanke said the most helpful thing that Congress and the Obama administration can do is to resolve the issue fast.
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