Bernanke: Economic Growth Will Be Slow
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From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.
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And I'm Robert Siegel. More positive economic news today. The economy was growing faster at the end of last year than previously thought. Add to that a closely watched manufacturing index was up sharply, but the news was not all good. Stocks ended down for the day. NPR's John Ydstie reports that's partly because the highlights were followed by a relatively glum assessment of the U.S. economy from Federal Reserve Chairman Ben Bernanke.
JOHN YDSTIE, BYLINE: The economic mood has been brightening recently with stronger job growth, sharp drops in the unemployment rate, an easing of the debt crisis in Europe and a stock market surge. This morning, before Chairman Bernanke began testifying at the House Financial Services Committee, the day's positive data on economic growth and manufacturing had sent stocks higher. But stocks reversed course as Chairman Bernanke sat down at the witness table and began delivering lines like this one.
BEN BERNANKE: The fundamentals that support spending continue to be weak. Real household income and wealth were flat in 2011, and access to credit remains restricted for many potential borrowers.
YDSTIE: And then he said this.
BERNANKE: Not withstanding the better recent data, the job market does remain far from normal.
YDSTIE: And Bernanke said continuing improvement on the jobs front will require stronger growth than we've had recently. The Fed's growth forecast of around two and a half percent for 2012 suggests progress will be slow for the rest of the year. Despite Bernanke's somewhat gloomy tone, many analysts are convinced the U.S. economy is gaining momentum, and that the Fed's intention to hold interest rates near zero until the end of 2014 will have to be reconsidered.
But Bernanke did not back off that date in his testimony. He did acknowledge that policymakers are evaluating the recent positive economic data, suggesting there could be a reassessment. The Fed chairman did express some optimism that credit is beginning to flow from banks. That came in response to a question from Republican Thaddeus McCotter of Michigan.
REPRESENTATIVE THADDEUS MCCOTTER: We still have trouble getting money down into the hands of people for credit, into the hands of people who can grow this economy and get jobs back.
BERNANKE: I guess I would just make one observation which was the news this morning that bank lending increased last quarter at the fastest rate since the recession.
YDSTIE: Bernanke also said that European governments had taken a number of constructive policy actions aimed at solving their debt crisis. And he said the mild recession in Europe should not have a big impact on the U.S. recovery.
As for America's own debt problems, Bernanke continued to press Congress to produce a credible plan to get the deficits and debt under control, but not implement it so quickly that it derails the recovery. And he warned them of looming danger at the beginning of next year. That's when the Bush tax cuts and payroll tax holiday expire, and automatic spending cuts agreed to by the president and Congress take effect.
BERNANKE: On January 1, 2013, there's going to be a massive fiscal cliff of large spending cuts and tax increases. I hope that Congress will look at that and figure out ways to achieve the same long-run fiscal improvement without having it all happen at one date.
YDSTIE: If Congress fails to act, Bernanke said, the shock could derail the economy. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.