The man who coined the term “fiscal cliff,” Fed Chairman Ben S. Bernanke, is getting worried the monster he named will gobble up any hopes of an economic recovery. He fears the automatic federal spending cuts and tax increases that would result without a deal between the White House and Capitol Hill Republicans.
“If the economy actually went off the fiscal cliff . . . that would have very significant adverse effects on the economy and on the unemployment rate. We would try to do what we could . . . but I just want to again be clear that we cannot offset the full impact of the fiscal cliff. It’s just too big.” — Bernanke, news conference (12/13)
Bernanke is backing up his fears with an aggressive plan by the Federal Reserve to bolster employment.
Just as some in both political parties are making noises that going off the “cliff” wouldn’t be so bad, Bernanke seems to be in a panic (at least by the understated standards of his world). I never like to see Fed chairmen freak out. That just can’t be good.