Senate Minority Leader Mitch McConnell (R-KY) has called it a "hostage worth ransoming," and expects it will be a bargaining chip on Capitol Hill for the next few years.
Bernanke also nudged Congress to juice the economy in the near-term, while enacting credible policies to reduce fiscal imbalances after the recovery's well underway.
"Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery," Bernanke said.
"Fortunately, the two goals of achieving fiscal sustainability--which is the result of responsible policies set in place for the longer term--and avoiding the creation of fiscal headwinds for the current recovery are not incompatible. Acting now to put in place a credible plan for reducing future deficits over the longer term, while being attentive to the implications of fiscal choices for the recovery in the near term, can help serve both objectives.
Fiscal policymakers can also promote stronger economic performance through the design of tax policies and spending programs. To the fullest extent possible, our nation's tax and spending policies should increase incentives to work and to save, encourage investments in the skills of our workforce, stimulate private capital formation, promote research and development, and provide necessary public infrastructure. We cannot expect our economy to grow its way out of our fiscal imbalances, but a more productive economy will ease the tradeoffs that we face."
Republicans, however, are now arguing against extending the payroll tax cut, and for requiring the government to cut spending to pay for the cost of disaster relief. The Fed's not doing anything. Congress isn't doing anything. A bleak picture.