Bernanke warning: Taxmaggedon is real

Federal Reserve Board Chairman Ben Bernanke (Win McNamee/Getty Images/AFP)
Federal Reserve Chairman Ben Bernanke testified before Congress this week and warned lawmakers that America’s economic future is landing flat on their shoulders.

During a Thursday meeting with congressional leaders in Washington, DC, Chairman Bernanke revealed that the dire dilemma of an “Taxmaggedon” coming to America is not just real but likely to rear its ugly head very soon if Capitol Hill can’t find a way to control the country from crashing off of the “fiscal cliff.”

Bernanke’s warning centered on a call for Congress to quickly address the issue of $1.2 trillion scheduled spending cuts and tax breaks entered during the George W. Bush administration that are slated to expire at the end of the year. Should Congress not figure out a way to handle the problem, American taxpayers are expected to pay around $310 billion more in 2012.

According to the Fed, it’s up to Congress to come up with a solution — one that doesn’t involve ignoring the problem of Taxmaggedon.

“What is particularly striking here is that this is all pre-programmed,” Chairman Bernanke said this week. “If you all go on vacation, it’s still going to happen, so it’s important to be thinking about that and working with your colleagues to see how you might address that concern at the appropriate time.”

Bernanke added that he suspected a delay on Congress, much like what happened with last year’s mishandling of the debt ceiling, could be catastrophic to the country’s finances. “I urge Congress to come to agreement on that well in advance so as not to push us to the twelfth hour,” said Bernanke. “But again, I think that trying to put our fiscal situation on a sustainable basis is perhaps one of the most important things that Congress can be working on.”

“The so-called fiscal cliff would, if allowed to occur, pose a significant threat to the recovery,” Bernanke warned. “If no action were taken and the fiscal cliff were to kick in in its full size, I think it would be very likely that the economy would begin to contract or possibly go even into recession, and that unemployment would begin to rise.”

Speculators had predicted that Bernanke would use his Thursday meeting in Washington to discuss a third round of quantitative easing from the Fed, or QE3, though the chairman did not confirm that the country’s top bank was preparing to do as much.

In April, Bernanke weighed in on the state of the US economy by saying that he expected the country to more quickly pull itself out of the recession that, although the government says ended in 2009, is still impacting Americans.

“Here we are almost three years from the beginning of the expansion, and the unemployment rate is still over 8 percent … It's been a very long slog. And that, I think, would be the single most concerning thing," said the chairman at the time.