Fed Chair tells Senate committee deficit plan will add jobs
Washington, DC, United States (AHN) – Federal Reserve Chairman Ben Bernanke on Friday called on the Senate Budget Committee to come up with a deficit reduction plan, saying he expected moderately more economic recovery in 2011 than in 2010, but not at a rate sufficient to make much of a dent in the unemployment rate.
He told the committee he foresees an unemployment rate of around 8 percent in two years and said it will take an additional four or five years beyond that to get the labor market back to normal. Bernanke also said he was not concerned about consumer inflation, as it has declined each year since the recession; however, wages have also declined.
Bernanke told senators that some sort of deficit reduction plan was necessary to reassure investors in order to boost the financial markets.
In addition, Bernanke told the committee members that a stable job market was the central bank’s first priority. He explained that coming up with a credible plan to do something to stabilize the job market now was essential to moving forward. Bernanke explained that because the economic recovery was still so fragile that it was not enough to say they were not doing anything now because of the recession and that they would do something later.
Bernanke told the committee that right now they needed to take into account the low rate of economic activity.
About two-thirds of the nation’s economy is dependent on consumer spending. However, with so many consumers out of work, fewer people have paychecks to spend. The percentage of Americans who have jobs fell again in December. According to a report released Friday morning by the U.S. Bureau of Labor Statistics, only 64.3 percent of working-age Americans had either a part- or full-time job in December.
Bernanke told the committee that the persistently high rate of unemployment is damping household income and confidence and that it could threaten the recovery’s strength and sustainability.
The Fed chair also defended his controversial $600 billion bond buying plan, saying it would not cost taxpayers in the end. He said the quantitative easing programs would yield excess profits to the Fed of $125 billion that it will remit to the Treasury.
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