Bernanke rejects GOP line, but still won’t act

Federal Reserve Chairman Ben Bernanke held a press conference this afternoon, and early on, made clear he has no use for the economic agenda espoused by his fellow Republicans.

“I don’t think that sharp, immediate cuts in the deficit would create more jobs,” Bernanke said, directly contradicting the guiding principle of GOP economic policy. He added that “fiscal tightening” from Congress would “probably” make unemployment worse, and “sudden and sharp fiscal consolidation” — what Republicans are demanding — would be “a negative for growth.”

Of course, GOP lawmakers will ignore all of this, perhaps because they want the economy to get worse.

In any case, Bernanke added that the problems holding the economy back may persist into 2012, and around the same time, the Fed revised its projections in a discouraging direction.

The Federal Reserve on Wednesday cut its forecasts for U.S. economic growth, but offered no hint of further monetary support, saying growth should pick up soon.

In quarterly projections released at the end of a two-day policy meeting, the central bank said the U.S. economy should grow 2.7 to 2.9 percent this year, a forecast that was marked down from a 3.1 to 3.3 percent projection released in April.

It said it sees 2012 growth in a 3.3 to 3.7 percent range. In April, it had said the economy would likely expand a somewhat more brisk 3.5 to 4.2 percent next year.

Any chance policymakers will respond to this by taking steps to give the economy a boost? Of course not. Congress doesn’t want to act; the White House doesn’t want to ask Congress for measures that can’t pass, and the Fed doesn’t want to act either, preferring a “hope-and-wait strategy.”

Ezra raised a good point this morning about doing more without doing enough: “A growing number of economic policymakers — former Fed vice chairman Alan Blinder, former CEA chair Christina Romer, former associate director for the Fed’s monetary affairs division Joseph Gagnon — believe that would’ve been, and in many cases, still is, possible. They argue that the bank’s underwhelming impact on the recovery is evidence not of the Fed’s inability to more effectively fight the recession, but its unwillingness to do what was needed to fight the recession. Larger and more aggressive asset purchases, price-level targeting, and various other dips into unconventional measures were and are needed. But all that would’ve been economically more effective and politically easier a year ago, or even two years ago, than it is today. Today, the Fed is under intense criticism, which limits its freedom of action. Having not done enough, they’re now unable to do more.”