The U.S. central bank
chief is warning President Barack Obama and Congress that failure to
reach a compromise on government spending and taxes by year's end would
pose a “substantial threat” to the country's fragile economic recovery.
Federal Reserve Chairman Ben Bernanke stepped up his warnings Tuesday
that the White House and lawmakers risk sending the world's largest
economy “toppling back into recession” if they do not resolve key
government financial issues. Washington is calling the January 1
deadline a “fiscal cliff,” with $600 billion in mandated spending cuts
and higher taxes affecting almost all U.S. workers.
The central bank has taken repeated steps to pump billions of dollars
into the U.S. economy. But Bernanke told the Economic Club of New York
that if the U.S. cascades over the fiscal cliff, he does not think the
Federal Reserve “has the tools” to offset such an economic shock.
Obama and the top four congressional leaders started negotiations last
week on how to end the tax and spending debate that has stymied top U.S.
officials for more than a year. They described their talks as
constructive and plan to meet again sometime after the Thanksgiving Day
holiday on Thursday, with the goal of resolving the stalemate by late
Bernanke said that if a compromise can be reached, it would help cut the
nation's high unemployment rate — now 7.9 percent — and boost sluggish
economic growth. He said resolution of the spending and tax issues
“could help make the new year a very good one for the American economy.”