U.S. failure to fix fiscal 'mess' undermines Fed on jobs: Fisher

Thu Oct 17, 2013 2:03pm EDT
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NEW YORK (Reuters) - The U.S. Federal Reserve cannot effectively fight high unemployment unless Congress and President Barack Obama "get their act together" and fix the nation's fiscal problems, a top Fed official said on Thursday.

"As long as inflationary expectations are held at bay, we can fully open the monetary throttle in an effort to deliver on the mandate Congress gave us to help achieve full employment," Dallas Fed President Richard Fisher said in remarks prepared for delivery to the Economic Club of New York.

"But it is for naught as long as the fiscal authorities are slamming on the brakes and leaving everyone in the dark as to how they will cure the fiscal mess they have wrought."

U.S. lawmakers late Wednesday approved a deal to reopen the government after a 16-day shutdown. The measure resolves no fundamental differences on spending and taxes that divide Democrats and Republicans.

By funding government only through January 15 and extending U.S. borrowing capacity until February 7, the measure leaves open the possibility of another government shutdown - and potentially another debt crisis - early next year.

"Kicking the can down the road for a few months will not solve the pathology of fiscal misfeasance that undermines our economy and threatens our future," Fisher said.

Fisher often blames lawmakers' inaction on resolving long-term U.S. fiscal imbalances for dragging down the economy. He has also been a vocal critic of the Fed's massive bond-buying stimulus.

On Thursday Fisher ramped up his rhetoric, comparing U.S. lawmakers' willingness to take the nation to the brink of default to a person ready to slit his wrists in a lukewarm bathtub. And, he said, continued Fed bond-buying could actually make matters worse, if the U.S. central bank is seen as an agent of financial "recklessness."

No amount of bond-buying can "offset the rot that is destroying our fiscal house and the blight it spreads over our economy," he said.   Continued...

Federal Reserve Bank of Dallas President Richard Fisher (R) testifies alongside FDIC Vice Chair Thomas Hoenig before the House Financial Services Committee hearing on "Examining How the Dodd-Frank Act Could Result in More Taxpayer-Funded Bailouts" on Capitol Hill in Washington June 26, 2013. REUTERS/Yuri Gripas