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House GOP Blames Fed for Congress's Inaction

House Republican lawmakers launched an unusual criticism at the Federal Reserve on Tuesday, scolding the central bank for allowing Congress to shirk its job creating sound fiscal policy.

The Fed’s easy-money policy and actions taken to boost economic growth have prevented lawmakers from taking responsibility for shoring up the economic recovery and reducing the deep federal budget deficit, some Republicans said Tuesday at a hearing of a panel of the House Financial Services Committee.

“As the Fed does more, Congress is doing less and in the long term that slows our recovery,” said Rep. Kevin Brady (R., Texas), who earlier this year introduced a bill that would narrow the Fed’s mandate to focus solely on inflation. Currently the central bank has a dual mandate charging it to pursue both stable prices and maximum employment.

The Fed’s unprecedented actions during the financial crisis and its aftermath have led the White House and Congress to take less responsibility drafting sound fiscal policy and sensible regulations and overhauling the tax code and federal safety-net programs, Brady said.

“They’re sort of like the doctor that gives you a pill every five minutes and says, ‘How are you feeling? Take another one,’” Brady said.

Echoing his sentiments, Rep. David Schweikert (R., Ariz.) asked if the Fed’s actions had created a “back door” that “allow[s] us as members of Congress to avoid tough decisions?”

But Rep. Barney Frank of Massachusetts, the top Democrat on the Financial Services Committee, rejected the idea that the Fed bore any responsibility for congressional shortfalls in restoring fiscal sustainability.

“It’s our fault we don’t step up,” Frank said, noting that the partisan gridlock was more to blame for lawmakers’ lack of progress in reducing the deficit. “The problem is we have very different views about how to do it — that’s democracy.”

Fed officials have acknowledged that the low interest rates generated by their policies have made government borrowing cheaper and warned that the costs associated with the federal budget deficit will climb when interest rates eventually start to rise. The central bank’s policy-making committee has said it expects to keep short-term interest rates near zero until at least late 2014.

Federal Reserve Chairman Ben Bernanke has repeatedly urged lawmakers that their top priority must be restoring long-term fiscal sustainability. At his most recent press conference, Bernanke warned that the Fed wouldn’t be able to offset the economic impact if Congress allows a cluster of tax breaks to all expire at the end of the year at the same time as new spending cuts are scheduled to kick in at the start of 2013.

Read on the WSJ website here.