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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.
"To be clear," he said, the Fed will take "all appropriate measures to preserve money market functioning and stability in periods of acute distress."
But any Fed action "to prevent serious disruptions of U.S. dollar funding markets should not be executed in a way that they might be construed to substitute for fiscal redress," he said.
Tolerance for repeated U.S. fiscal and debt crises is not unlimited, Fisher warned, citing a decision last week by Hong Kong Exchanges and Clearing to accept U.S. Treasuries at a discount given rising uncertainty around the U.S. ability to pay its debts.
"The bond market is beginning to show us the back of its hand," he said. "Unless the fiscal authorities get their act together, looking to the Fed to solve the nation's economic ills through ever-expansive monetary policy might well make the situation worse."
Reporting by Jonathan Spicer; Writing by Ann Saphir; Editing by Lisa Shumaker