When the chairman of the Federal Reserve sits behind his considerable podium Wednesday afternoon to explain why the Central Bank remains worried about the economy, his colleagues on Capitol Hill and in the White House will have one week to figure out how to avoid a government shutdown. That alone helps account for Ben Bernanke’s queasiness. His agency has been flooding the economy with capital while the fiscal fight drags out in Congress.
So far, the Federal Reserve has been winning. The stock market hovers near new highs. Interest rates continue floating around historic lows. The housing market is on the mend. Americans are buying a lot of new cars and trucks. Households are paying down credit card debt. Inflation is low and the unemployment rate is slowly dropping.
In late February, Bernanke told Congress, “Although monetary policy is working to promote a more robust recovery, it cannot carry the entire burden of ensuring a speedier return to economic health.” The challenge he laid out to senators and congressmen was to forge a budget strategy that will help grow the economy long-term without putting it at immediate risk. In other words, cut the rate of government spending growth, but don’t cut it too much too soon.
Bernanke has a bully pulpit on Wednesday afternoon to pressure lawmakers again. Investors are convinced, with good reason, he isn’t about to change course. But he hasn’t had any luck getting Congress to find compromise. Legislators have already ignored his calls to replace the sequestration spending cuts with a more gradual approach. With less than a year left in his second term as Fed chairman, Bernanke can afford to spend some of his communications capital.
Tom Hudson is a financial journalist based in Miami. He is the former co-anchor and managing editor of Nightly Business Report on public television.