Yet growth in 2013 has been soft, hurt by weak export growth and manufacturing. Despite the stronger job market, the unemployment rate, now at 7.6 percent, remains much higher than normal. The sequester, the huge cuts in federal spending that took effect in March after Congress failed to reach a deal on fiscal policy last year, is also restraining economic activity.
Bernanke has cited fiscal drag repeatedly in his comments on the economy, and did so again today. “The risks remain that tight federal fiscal policy will restrain economic growth over the next few quarters by more than we currently expect or that the debate concerning other fiscal policy issues, such as the status of the debt ceiling, will evolve in a way that could hamper the recovery,” he said.
GOP Response: Nuh-uh.
The main reason we’ve had QE for so long is because Congress is doing the wrong things. If we had a Congress that actually wanted to try and create jobs (as they said in 2010…then went on to try to ban abortion and repeal health care and end Medicare and Medicaid) we wouldn’t need QE.
But because we have the Know-Nothings in Congress, the Fed has to act to keep them from screwing everything up…or at least keep them from keeping everything screwed up.