Tornado Alley (PROG)

[StephanieVanbryce]

Bernanke Warns Congress Not To Cut Spending, Cautions About 'Fragile' Recovery

06- 9-10 02:17 PM

While the conventional wisdom in Washington appears to focus largely on the need to lower the federal government's budget deficit, rather than on reducing the nation's nearly 10 percent unemployment rate, Federal Reserve Chairman Ben Bernanke sent a message Wednesday to lawmakers: Now's not the time.

"Right now I don't think is the time -- this very moment is not the time -- to radically reduce our spending or raise our taxes because the economy is still in recovery mode and needs that support," Bernanke testified before the House Budget Committee.

Bernanke referred to the nascent economic recovery as "still pretty fragile" and cautioned that the economy "may need more assistance."

Though the nation's output is growing, jobs are still scarce; nearly eight million jobs have been lost as a result of the worst financial crisis since the Great Depression. Since January the private sector has created about 480,000 jobs, Labor Department data show. At that rate, the economy won't return to its pre-recession employment level of about 115.6 million jobs until about 2016.

The lack of jobs accompanying the ascent out of the "Great Recession" has led economists and commentators such as regional Federal Reserve Bank presidents to term this a "jobless recovery." Others, while not making that claim outright, worry that's what the recovery will end up being unless current stimulative measures -- such as the Fed's policy of a near-zero main interest rate -- continue.

The Fed is "doing its part," Bernanke said of the central bank's "supportive monetary policy." The main interest rate stood at 0.20 percent in May, Fed data show.

The nation's central banker added that government's fiscal policy, like the nearly $800 billion stimulus bill passed last year, "is helping" and that it's "needed."

http://www.huffingtonpost.com/2010/06/09/bernanke-warns-congress-n_n_606232.html