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Bernanke: Economic Outlook Has Deteriorated

Aired 10/4/11 on KPBS Midday Edition.

GUESTS

Dan Seiver, Finance Professor, San Diego State University

Kali Katt, spokesperson, Occupy San Diego

Transcript

Federal Reserve policymakers expect "a somewhat slower pace of economic growth over coming quarters" than they had been forecasting just four months ago, Chairman Ben Bernanke told Congress this hour.

There has been, he added in a statement prepared for the Joint Economic Committee, a "deterioration in the economic outlook over the summer."

In testimony that's posted here and is being webcast here, the central bank chief says:

— "It is clear that, overall, the recovery from the [2008-09 financial] crisis has been much less robust than we had hoped."

— "Incoming data suggest that ... persistent factors ... continue to restrain the pace of recovery." Those include: cautious consumers, a housing sector dealing with an "overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and the large number of 'underwater' mortgages" and tight credit for "households, small businesses, and residential and commercial builders."

— "Another factor likely to weigh on the U.S. recovery is the increasing drag being exerted by the government sector. Notably, state and local governments continue to tighten their belts by cutting spending and employment in the face of ongoing budgetary pressures, while the future course of federal fiscal policies remains quite uncertain."

On the federal government's fiscal condition, Bernanke again said that action needs to be taken. And in his prepared testimony he said that:

"I would submit that, in setting tax and spending policies for now and the future, policymakers should consider at least four key objectives. One crucial objective is to achieve long-run fiscal sustainability. The federal budget is clearly not on a sustainable path at present. The Joint Select Committee on Deficit Reduction, formed as part of the Budget Control Act, is charged with achieving $1.5 trillion in additional deficit reduction over the next 10 years on top of the spending caps enacted this summer. Accomplishing that goal would be a substantial step; however, more will be needed to achieve fiscal sustainability.

"A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery. These first two objectives are certainly not incompatible, as putting in place a credible plan for reducing future deficits over the longer term does not preclude attending to the implications of fiscal choices for the recovery in the near term.

"Third, fiscal policy should aim to promote long-term growth and economic opportunity. As a nation, we need to think carefully about how federal spending priorities and the design of the tax code affect the productivity and vitality of our economy in the longer term.

"Fourth, there is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy.

"In sum, the nation faces difficult and fundamental fiscal choices, which cannot be safely or responsibly postponed."

Comments

Avatar for user 'HarryStreet'

HarryStreet | October 4, 2011 at 9:27 a.m. ― 2 years, 11 months ago

No kidding!!! Our politicians have been looking the other way for years and now that it's time to pay the piper they don't know what to do. We don't need jobs! We need careers that pay a living. We're getting college, vocational, and other forms of education and experience, but companies aren't paying wages like they used to, thus making it difficult to repay student loans, save for a rainy day, buy a home, get credit, the list is endless!

Our government should have stopped hiring government workers long ago. That's simply another burden on the taxpayer. Government bonuses, overtime, pension benefits is a drag on spending and prevents our tax payer dollars from paying teachers and schools.

The world we now live in is this:

I took a 30k pay cut for a job in 2009 not realizing how bad the economy would eventually be. This is why I feel more lucky now than I did when the job first came my way. I don't spend my money unless I absolutely have to. Example: I needed a pencil-sharpner and didn't want to buy a cheap $10 electric one at Target or Walmart (I hate Walmart and don't shop there). I went to Office Depot and Staples and the real good ones cost $23. Add tax and it's just around $26. I didn't buy the sharpner because $26 is $26. Instead I lucked out at a thrift store for $2.95.

Some might say good for me. But our economy is structured on people spending, spending, and more spending. I would've liked to have bought my sharpner at a business that hires people like Office Depot and Staples, but I simply can't afford to buy most things new. Add up the number of Americans in similar situations and you have an economy that is unsustainable and will take years to turn around.

Our government would do well to revisit history. Adolf Hitler came to power because of economic strife and unrest in Germany. The people wanted work, education, pride. This is precisely what happened in the Middle East. The new generation did not want a monarchy, they wanted education, work, careers and opportunity. Does any of this sound familiar to you?

It's only a matter of time before a drastic change happens here.

....And make no mistake...Sarah Palin is not our answer...Neither the Tea Party.

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