But We Still Need More Fiscal Stimulus

Sudeep Reddy:

Fed Officials Push For Fiscal Stimulus: Top Federal Reserve officials are pressing lawmakers to pair a long-term plan for deficit reduction with new short-term fiscal stimulus to boost an economy that the central bank admits needs more help than it can provide. Fed Chairman Ben Bernanke has tucked support for a two-part fiscal strategy into speeches, and has pushed it behind the scenes with lawmakers, offering a boost both to deficit hawks and to proponents of spending more or taxing less in the near term. Fed Vice Chairman Janet Yellen, in a speech on Wednesday, amplified Mr. Bernanke's call:

We need, and I believe there is scope for, an approach to fiscal policy that puts in place a well-timed and credible plan to bring deficits down to sustainable levels over the medium and long terms while also addressing the economy's short-term needs.

Ms. Yellen didn't elaborate on the latter.

Even if the central bank's controversial bond-buying initiative works as its proponents hope, Fed officials acknowledge it will only do a little to boost growth and bring down unemployment... three-tenths of a percentage point....

In public, Mr. Bernanke has called for a fiscal program "that combines near-term measures to enhance growth with strong, confidence-inducing steps" to reduce the deficit. "There are limits to what can be achieved by the central bank alone," he said in a speech last month. In meetings with lawmakers, he has avoided specifics so as not to step on political terrain, leaving his views open to interpretation. "He's never defined what short-term stimulus is to me," said Sen. Bob Corker (R., Tenn.), who met with Mr. Bernanke last month. "I'm going to take that to mean keeping our tax rates where they are for at least a couple of years while we wrestle with the tremendous spending issues"...