WASHINGTON — Federal Reserve Chairman Ben Bernanke might feel surrounded when he testifies before Congress this week.
From his left, Democrats will demand to know what the Fed can do to create jobs, especially after the government reported last week that unemployment rose to 9.2 percent in June and just 18,000 net new jobs were generated.
From his right, Republicans will likely question the Fed’s complicity in high energy and food prices.
“The Fed has become a very convenient whipping post for members of Congress,” said Sarah Binder, a George Washington University political scientist who has studied the Fed’s relations with Congress.
But Bernanke won’t just play defense.
He is expected to issue a strong warning to lawmakers to raise the nation’s debt limit before an Aug. 2 deadline. On that day, the government won’t have enough money to pay all its bills and could default on its debt.
“We believe he will be very harsh and direct when it comes to the issue of a U.S. default,” said David Kotok, chairman of the investment firm Cumberland Advisors. “He will ask the Congress not to play games with the debt limit.”
Negotiations have bogged down. Republicans reject Democratic proposals to include any tax increases in any deal to slash the federal government’s deficits in exchange for raising the $14.3 trillion debt limit. Economists fear the threat of default will send interest rates soaring and risk tipping the economy back into recession.
