Federal Reserve Chairman Ben S Bernanke said extending the tax cuts passed during former President George W Bush’s administration would help strengthen a US economy still in need of stimulus.
“In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” Bernanke said yesterday in testimony before the House Financial Services Committee. “There are many ways to do that. This is one way.”
Bernanke aims to bolster the faltering economic recovery while urging lawmakers to reduce federal budget deficits in the medium term, which he defined as the period from 2013 to 2020. His predecessor, Alan Greenspan, last week said lawmakers should allow the tax cuts to expire at the end of 2010, citing a need for the revenue to reduce the budget gap.
“We need to be taking steps to reassure the American people and the markets that our fiscal situation is going to be well controlled,” Bernanke said under questioning from Representative Spencer Bachus of Alabama, the committee’s senior Republican. “That means that if you extend the tax cuts, you need to find other ways to offset them.”
Bernanke, in the second day of semi-annual congressional testimony on monetary policy, said the central bank will act to spur growth should the economy sputter. A top lieutenant, New York Fed President William Dudley, said yesterday that the “road to recovery is turning out to be a bit bumpy.”