Congress steering US economy toward a 'fiscal cliff'
Fed Chairman Ben Bernanke calls it the “fiscal cliff.” It might be better thought of as the next economic Armageddon.
Unless Congress acts to soften the blow, economists are warning that a looming year-end collision of massive, “automatic” cuts in federal spending and the expiration of sweeping Bush-era tax cuts could crush an already weak U.S. economic recovery.
And unlike the central bank’s response to the Panic of 2008, the Fed would be powerless to offset the catastrophic impact on the economy and financial markets.
"There is absolutely no chance that the Federal Reserve would be able to have the ability whatsoever to offset that effect on the economy," Bernanke told reporters Wednesday, following a two-day meeting of the Fed's policy-making committee.
The risk of a potential economic train wreck stems from a series of contentious political decisions that Congress has been ducking for years, postponing a long list of tough choices until the end of the year, until after the national elections.
Now, unless a compromise is reached, sharp cuts in federal spending will remove hundreds of billions of dollars from the U.S. economy, virtually overnight. At the same time, American consumers will see a massive increase in taxes that will sharply curb their spending power, taking another big bite out of the economy.
Economy Watch - Congress steering US economy toward a 'fiscal cliff'
Comments?
Fed Chairman Ben Bernanke calls it the “fiscal cliff.” It might be better thought of as the next economic Armageddon.
Unless Congress acts to soften the blow, economists are warning that a looming year-end collision of massive, “automatic” cuts in federal spending and the expiration of sweeping Bush-era tax cuts could crush an already weak U.S. economic recovery.
And unlike the central bank’s response to the Panic of 2008, the Fed would be powerless to offset the catastrophic impact on the economy and financial markets.
"There is absolutely no chance that the Federal Reserve would be able to have the ability whatsoever to offset that effect on the economy," Bernanke told reporters Wednesday, following a two-day meeting of the Fed's policy-making committee.
The risk of a potential economic train wreck stems from a series of contentious political decisions that Congress has been ducking for years, postponing a long list of tough choices until the end of the year, until after the national elections.
Now, unless a compromise is reached, sharp cuts in federal spending will remove hundreds of billions of dollars from the U.S. economy, virtually overnight. At the same time, American consumers will see a massive increase in taxes that will sharply curb their spending power, taking another big bite out of the economy.
Economy Watch - Congress steering US economy toward a 'fiscal cliff'
Comments?
