Bernanke Says Fiscal Cliff Already Hurting Economy

Bernanke says fiscal cliff already hurting economyBy MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON (AP) - The U.S. economy is already being hurt by the "fiscal cliff" standoff in Washington, Federal Reserve Chairman Ben Bernanke said Wednesday. But Bernanke said the Fed believes the crisis will be resolved without significant long-term damage.

The steep tax increases and spending cuts can be avoided with a successful budget deal, Bernanke said during a news conference after the Fed's final meeting of the year. The Fed's latest forecasts for stronger economic growth next year and slightly lower unemployment assume that happens.

Still, Bernanke said the uncertainty surrounding the resolution is already affecting consumer and business confidence. And it has led businesses to cut back on investment.

"Clearly the fiscal cliff is having effects on the economy," Bernanke said.

Bernanke said the most helpful thing that Congress and the Obama administration can do is resolve the issue quickly.

"I'm hoping that Congress will do the right thing on the fiscal cliff," Bernanke said. "There is a problem with kicking the can down the road."

Bernanke repeated his belief that if the scheduled tax hikes and spending cuts do take effect in January, they will have a significantly adverse effect on the economy, regardless of what the Fed might do.

"We cannot offset the full impact of the fiscal cliff. It's just too big," Bernanke said.

Still, the Fed took more steps Wednesday to try and help boost economic growth and lower unemployment.

After the meeting, the Fed said it would keep its key short-term interest rate near zero as long as unemployment remains above 6.5 percent and inflation stays tame. It was the first time the Fed had linked future rate increases to specific economic markers.

And in an effort to drive unemployment lower, the Fed said it will spend a total of $85 billion a month to sustain an aggressive drive to keep long-term interest rates low.

Keeping rates low encourages more borrowing and spending, which drives economic growth.

At the news conference, Bernanke said changes in the purchases will be determined by how the economy performs.

He said the Fed expects to keep purchasing bonds to support economic growth "until we see substantial improvement in the labor market."

But if the committee determines that the risks of increasing the Fed's balance sheet begin to outweigh the benefits, the purchase program will be modified, he said.

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Read "The Creature From Jekyll Island" . Bernake and Greenspan are Bankster Crooks. Henry Paulson got up in Congress and said the 2008 bail-out money went to any bank that had dealings with the Federal Reserve including their foreign shareholder banks. This is created out of morgage fraud created by the too-big -too fail banks and we need to write off the debt and jail these Banksters like the country Iceland did for fraud. The intent here is to put the U.S. under Austerity Laws for the debt 16 trillion the Banksters and crooked goverment signed us the taxpayers on to. Then when austerity doesnt work we will be made to take a loan-bailout thru the IMF/World Bank that these Bankster Crooks own and then we will be under monitary control by them. This has bee the global scheme since the Club Of Rome was founded in 1957. Read "The Rise Of The Fourth Reich." by Jim Marrs. Greece Spain and England are going under Austerity Laws and they will be here too. The Solution is ti re-instate the Glass-Steagle Act Of 1933 and write off the 16 tril we don,t owe then jail the members of the Federal Reserve Board for fraud. This whole debt crises is nothing but a consolidation scheme to place countries under the IMF/World Bank that these globalist banksters own. They will control the goverments thru moneytary system means.

December 16 2012 at 6:37 PM Report abuse +2 rate up rate down Reply

According to the Wall Street Journal...

Since the recession ended in June 2009, total U.S. debt has risen at the slowest pace since they began keeping records in the early 1950s...In the 11 quarters since the recession officially ended, total domestic debt has risen by just $702 billion, or 1.4%. By contrast, in the 11 quarters before the recession began, in those bubble years of 2005, 2006 and 2007, total debt increased by $10.7 trillion, or 28%.

In fact, the US debt load, that is the ratio of US debt to US GDP, has been falling for the first time in 30 years, down from a high of over 3.7 in 2009 to less than 3.4 today. That's still high, but the US debt load could continue to drop as the economy slowly recovers from the recession.

Furthermore, the cost of our debt is quite cheap now with record low interest rates. The interest on the US public debt is costing us only about 1.5% of GDP.

December 15 2012 at 3:38 PM Report abuse rate up rate down Reply
Greg Fike

Ben looks worried because he know if we went off the cliff the average american would never know it the money he prints only feeds the stock market and and does not put any food on the table for hungry americans.
Thats why he is trying to throw money at washington. Bring on the cliff and tell Ben America is done with his control.America needs to start printing treasury notes again and use that to buy the feds money and get out of of this bottomless pit could the..

December 14 2012 at 4:15 PM Report abuse rate up rate down Reply

The economy is ALREADY over the cliff due to the federal reserve creating the artificial low interest rate devaluing the dollar through deficit spending and creating a myth of low inflation. Every savings account in america has lost 20% of its value and inflation is already at much higher levels than the Fed would have you believe. Then if you get a .002% return the IRS has the authority to tax you on the proceeds, which even lowers the value further. If you believe inflation is stagnant, go grocery shopping, or fill your tank with gasoline.

December 13 2012 at 12:29 PM Report abuse +1 rate up rate down Reply
1 reply to AL's comment

Gas is now $3.25 per gallon, has not skyrocketet as per Chicken Littles on these blogs. Personally I don't care if it goes to $10. I don't use much gas anymore. I drive a Chevy Volt which uses about 2 gallons per 1000 miles. Costs me about 10 cents in electricity to go 50 miles. My neighbor with his Lexus SUV is pumping 90 bucks into his beast every week. One guy driving a huge gas guzzler that drinks dinosaur juice just to haul his butt to work every morning - what a waste.

December 13 2012 at 4:09 PM Report abuse rate up rate down Reply
2 replies to chris1011's comment

U r full of sh**

December 14 2012 at 3:38 AM Report abuse rate up rate down

Coal is fossil fuel, and most of America's electric comes from coal fired plants. PS the Volt is nothing more than a Government Motors Abortion.
Dinasoar juice charges your mobile generator. Dumbasss

December 14 2012 at 3:44 AM Report abuse rate up rate down

Yet the frigging douchenozzle keeps devaluing our money, FA-Q Ben. When is QE 4 coming ?

December 13 2012 at 2:48 AM Report abuse +2 rate up rate down Reply

my opinion on the fiscal cliff is it always hits the poor peps all the time the poor gets poorer and the rich gets richer what im saying in i think the peps that make more money then us the poor peps i think they should pay more in taxes i just dont understand why the cost of everthing affects the poor peps more and more all the time the goverment allways wants to raise taxes on the poor peps all the time i just dont get it

December 12 2012 at 9:01 PM Report abuse rate up rate down Reply

what is wrong with spending cuts and some higher taxes? it is what needs to happen.

December 12 2012 at 6:57 PM Report abuse rate up rate down Reply
2 replies to maa2626's comment

The cuts won't happen.

December 12 2012 at 7:43 PM Report abuse rate up rate down Reply

There is two things wrong with that approach.

1) NOBODY has even PROPOSED actual spending cuts. Instead, what is being sold to the dumb ones is a reduction in the rate of spending GROWTH. Even the most aggressive proposals to curtail spending STILL propose HIGHER amounts of government spending. Until a proposal is put on the table to actually CUT spending (which, of course, will be never), no consideration whatsoever should be given to proposals to increase taxes

2) From the other DF article on this page:

"He (Obama) had promised in February 2009 to cut the deficit in half by the end of this first term."

"Overall tax revenue rose 10 percent in the first two months of the budget year to $346 billion. But spending has risen faster, up $87 billion or 16 percent."

Revenue obviously isn't the problem. In fact, it is growing fairly rapidly without additional taxes. Yet, spending is growing even faster, If this trend continues, simple math stipulates that eventually 100% of the economy would be controlled by government goons.

You can't solve a problem by ignoring its root cause.

December 12 2012 at 10:10 PM Report abuse rate up rate down Reply

Just keep the presses rolling Ben ..we can hardly wait for inflation to hit double digits!

December 12 2012 at 6:30 PM Report abuse +1 rate up rate down Reply