Bernanke admits Congress is the biggest threat to U.S. Economy

Congress is the the main impediment to a more robust economy, Ben S. Bernanke told Congress today in what may well be his swan song on Capitol Hill.

What’s more, lawmakers are on course to make things worse before the end of the year, the custodian of monetary policy warned the caretakers of fiscal policy…

“The risks remain that tight federal fiscal policy will restrain economic growth over the next few quarters by more than we currently expect, or that the debate concerning other fiscal policy issues, such as the status of the debt ceiling, will evolve in a way that could hamper the recovery,” he said.

Bernanke was pointing to one of the under-appreciated realities of the congressional budget discussion ever since Republicans took control of the House three years ago. The parameters of the debate don’t include any discussion of an expansionary fiscal policy — one in which large amounts of federal spending and low rates of taxation give the economy plenty to grow on…

Where the profound disagreement comes is over which way to accomplish the contraction. Republicans say the route should be entirely spending cuts, which would likely be felt most in two of the nation’s biggest economic engines, the health care and military hardware industries.

Democrats say higher taxes on the wealthy is the essential answer, even while conceding that such a move might crimp the pace of investment and thereby expansion…

Bernanke is on the Hill today and Thursday for his required biannual presentations to Congress on Fed monetary policies. Because he’s widely assumed to be stepping down when his second term as chairman ends in January, his appearances before the House Financial Services and Senate Banking committees are likely to be his last as a congressional witness.

He may as well give the Congress-critters a listen to more detail, a more explicit description of how the economic community broadly views the radio comedy that is our legislative branch of government. No doubt there will be a book deal after he leaves. All his expertise on FDR’s battles with incompetent politicians over trudging out of the Great Depression should mate up nicely with his parallel experiences during the Great Recession.

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