Fed Chairman's Warning to Senate

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Bernanke did not mince words in his testimony in the Senate. He told them that cuts in federal spending in the current year were counterproductive and that they would slow the recovery. Moreover, he stated that they did little to impact the long-term budget deficit problems that we may face unless Congress puts a plan in place to deal with the real deficit problems. The GOP and the administration have been proposing cuts in federal spending in the current year as part of their 2012 electioneering. Bernanke told them to focus on a 5-10 year plan instead. Ordinarily, Congress takes comments from the Fed Chairman seriously. Its unlikely, however, that Congress will put a budget in place that interferes with a good campaign strategy. The economy takes second place to winning elections.