Fed to watch if U.S. goes off fiscal cliff
The Kansas City Star
The Fed may only be able to watch if Congress and the president are unable to work out a deal to prevent the country from falling off the fiscal cliff.
The expiration of tax cuts and automatic spending cuts are expected to take the United States off the cliff and back into a recession, Ben Bernanke, Federal Reserve chairman warned in an address to the Economic Club in New York. The average consumers will see the hundreds of dollars in disposable income they’ve enjoyed go back to the government in taxes.
That spending has been the grease that has kept the wheels of the U.S. economy going. Combine that with radical spending cuts and instant rust could freeze up U.S. industries.
Bernanke said the Fed has sprayed all of the fiscal WD-40 it’s got to get the economy unstuck from the Great Recession and moving again, albeit it painfully slowly. The Fed’s lubricants have included keeping interest rates near zero through mid-2015 and building in a third round of quantitative easing, agreeing to buy $40 billion of mortgage debt each month until the job market has improved more.
The Fed may not have much more it can do to help if elected officials don’t work something out. Let’s hope lawmakers are taking this seriously.