WASHINGTON – Federal Reserve Chairman Ben Bernanke's first appearance before the House since Republicans took control last month is likely to be a tough one. And much of the grilling will probably come from members of his own party.
Bernanke is a Republican who served as President George W. Bush's chief economist. Bush chose him to run the Fed in 2006.
President Barack Obama ran into initial resistance in his effort to get Bernanke confirmed for a second term as chairman in late 2009. Republicans led the opposition, upset over the Fed's role in bailing out Wall Street firms during the financial crisis. In January 2010, the Senate confirmed Bernanke for a second term, though by the narrowest margin for any Fed chairman.
Many economists, academics and supporters in Congress credit Bernanke with helping prevent the Great Recession from turning into a second Great Depression.
But that's in the past. Bernanke's efforts to help invigorate the economy through a program to buy $600 billion in Treasury bonds have incited criticism.
Much of it has come from Republicans, including House Speaker John Boehner of Ohio and Senate Minority Leader Mitch McConnell of Kentucky. They've argued that the program could ignite inflation or cause speculative buying that might inflate bubbles in assets like stocks.
Bernanke is likely to face grilling from lawmakers about the costs and benefits of the program when he testifies to the House Budget Committee on Wednesday morning. The committee's chairman, Paul Ryan, R-Wis., has raised concerns about the Fed's efforts to stimulate the economy, including buying government debt. He, too, says he fears the Fed's actions could spur inflation.
Lawmakers from both parties will likely aim to get Bernanke to back their solutions for reducing the government's $1 trillion-plus budget deficits. Ryan has promoted budget cuts as the way to reduce deficits.
As in the past, Bernanke probably won't endorse a specific legislative approach for cutting the deficits. But he'll likely again warn Congress and the White House that failing to forge a plan to reduce deficits over the long term could hurt the economy later.
Persistent budget deficits will prompt investors to demand higher yields on government debt, causing interest rates to soar, Bernanke has said. Higher borrowing costs would crimp spending by consumers and businesses, slowing economic activity, he's warned.
Last week, Bernanke stepped into the political debate over the nation's debt limit. The Fed chief warned congressional Republicans not to "play around with" the Treasury Department's request to boost the government's borrowing authority beyond the current $14.3 trillion statutory cap. House Republicans have vowed to make deep spending cuts a precondition for voting to raise the debt ceiling.
The department has asked Congress to let it borrow more so it can continue to pay its bills. In the unlikely event that Congress denied the request, the U.S. government would be at risk of defaulting on its debt.
Bernanke, in remarks last week to the National Press Club, said the implications would be catastrophic. He urged Congress not to use the debt limit as a "bargaining chip" in broader discussions about reducing the government's deficits.
At the same time Bernanke is testifying, Rep. Ron Paul, R-Texas, will hold a hearing on whether the Fed's bond-buying program and record-low interest rates can really help create jobs.
Paul, a Bernanke critic who favors abolishing the Fed, says the "nation's employment picture remains bleak" despite the Fed's actions.
The unemployment rate has sunk in the past two months — from 9.8 percent to 9 percent. But it remains very high by historical standards. And job creation is still weak. Bernanke has said it will take "several years" for unemployment to drop to normal levels.