estimates? >> is it 100 billion? >> fiscal. >> excuse me, talking calendar year 2011. >> we're talking fiscal. >> well, in terms of growth numbers, it would be an effect this year of a tenth or two, then an additional tenth in 2012, also if the effects of them spread out over time, beyond the fiscal years. >> thank you. >> senator crepele. >> thank you, mr. chairman. i'd like to follow imon that line of questioning for just a minute. because get into these constant debates here when we try to reduce spending at the federal level about whether that's going to cost jobs or a decrease in the economy. don't you believe at some point, congress has to start paring back the spending?

>> certainly. i've said so many times. but again, we don't have a single year problem. we have a long-term problem that needs to be addressed in a lo-term basis. several economists talked about the president's fiscal commission about this, and they talked about the long-term commitment that's needed. it indicated that one of the best thing we could do for our economy, was to it as a congress, adopt a long-term plan that made sense and that would show the world economies that we were committed with dealing with our fiscal problems. would you agree with that? >> yes, senator, i was the first commission. to the extent we can we address the longer term trajectory, which was not sustainable, we could ensure lower interest rates, great confidence and it would be, in a minimum, helpful

to the current recovery. but more importantly, it would protect us from fiscal or financial crisis down the road. >> you don't need to comment on this if you'd like to. i would add that congress budgets at a one year at a time basis, frankly, we have to look at the year we're dealing with as we move forward. although i'd agree we have to look long term, we don't adopt long-term budgets here. at least historically. thank you very much for your involvement in that context. in the context of the transparency issues that you've discussed, i'd like to focus on gse reform, fannie mae and freddie mac in particular. i'm convinced that congress grapple with the need to deal with fannie mae and freddie mac and how we should proceed. i have my opinions on how we should proceed in that context. at least as a with regard to t

federal obligations represented by fannie mae and freddie mac. in a january 2010 cbo report, it was concled that fannie mae and freddie mac have effectively become government entities in the way that they arenow managed. and their operations should be included in the federal budget. do you agree with that cbo report in that context, in the context -- in other words, whether the debt oblations of fannie mae and freddie mac should be included in our federal budget? >> well, i'm not an accountant and i defer to those with better knowledge on that point, but i would justay that if you do that, of course, you would add the debt to the federal debt, but you would also have to offset that to some extent with the assets that the fannie and freddie holds. so whether you consolidate or whether you simply take as a charge the obligations that the government has to support fannie and freddie, you would still

have the same net effect on the government's fiscal position overall. >> at a minimum it seems to me we ought to acknowledge the taxpayer is on the hook or the debt and we ought to let the americ public know what that is. and i fully agree that if we need to also show the assets, so be it. but right now the american public is on the hook for the debt, we're not necessarily going to be able to obtain access to the assets. it is going to be very interesting to see how congress moves forward to deal with this. another question just shifting subjects for a minute is do you believe an explicit inflation target would help promote the credibility of the federal reserve by being explicit about its subjectives and help it to anchor inflation expectations? >> well, i supported this idea for many, many years. and the subtlety is helping everyone understand that by giving a number, which would help clarify what the fed is trying to achieve and would help, we hope, anchor

expectations more firmly, that we wld not be abandoning in any sense the other part of the congressional mandate to maximum deployment. we have moved part way in that direction in that we provide information in our projections about what the committee individually thinks is the best long run inflation goal -- inflation outcome and that currently is somewhere between 1.5% and 2% on the pce price index. but we have not gone all the way to a formal inflation target. again, the communication issue here is to make people understand that this is a way of improving communication in general without necessarily abandoning the -- without abandoning the other aspect of -- the other side of our mandate. >> thank you. i see my time has expired. >> senator menendez. >> thank you, mr. chairman.

thank you, chairman bernanke for your service. my main goal every day is how do we agree the economy, how do we get people back to work, certainly from my home state of new jersey and for that fact every american. and it was my hope that the quantitative easing that the fed was in the midst of would produce more jobs, more exports, more investments and ultimately a smaller budget deficit by obviously generating profits that would go into the treasury's coffers. but as we expand this balance sheet, and buy treasuries and buy goldman sachs and expect that these ultimately get deposited in banks so that those banks woul ultimately lend, i have to be honest with you, i not quite sure, and this is where i'm headed in terms of my question, i'd like toget a grasp from you, i don't see that lending still taking place and i hear it all over my state. i see food prices rising.

i see gas prices rising, even before what was happeng in north africa. that certainly is an exacerbating reality. tuition rates rising. and so while we are worried about deflation, i just see a combination of rising prices for the average family of a lack of investment that i had hoped that would take place here and so would you get me your view of how the first and second rounds of quantitative easing are working? >> i thinkhey're working. i think they're working well. the first round in march 2009 was almost -- almost t same day as the troth of the stock market and since then the market has virtually doubled. the economy was going from total collapse at the end of t first quarter of '09 to pretty strong growth in the second half of '09. as i said, it is now in the seventh quarter of expansion. so i think that was clearly a

positive. the current -- the current qe, as it is called, as i have said, it appears to have had the desired effects on markets in terms of creating stimulus for the economy and i cited not just federal reserve forecasts, but private sector forecasts which have almost uniformly been upgraded since august, since november, suggesting that private sector forecasters are seeing more growth and more employment this year than they had previously expected. i think it is in fact havi benefits for growth and employment. on the inflation side, i, as i said before, i think the bulk of the commodity price movements are not resulting from federal reserve policy, but are resulting from global supply and mand factors. for example, in the case of food, there have been major crop

failures and weather issues and things around the world which have affected supply. and on the demand side, you have emerging market economies which are growing very quickly and creating extra demand for raw materials. that's what's happening there. even with that increase in commodity prices, overal inflation, as i mentioned, still remains quite low in the united states and we are determined to make sure that higher gas prices and food prices don't become embedded in the overall inflation. >> i appreciate the market going up, we're thrilled to see that. but to be honest with you, if you talk to an average family in new jersey and you say, what is your food bill, what is your gas price, what is your tuition rising, they're not going to tell you there is deflation. and so in a real context, i'm wondering how this macro econom policy is going to get to the average person in a way that changes their life in a more positive way. and certainly the market is a

nice indicator in one sense but it isn't for everybody in their lives. and that brings me to the question, how -- when are you going to -- how will you decide how to tighten monetary policy? how do you know when you've reached the point where that is send what type of considerations are you going to take into account? >> well, monetary policy works with a lag and therefore we can't wait until we get to full employment and, you know, target inflation rate before we start to tighten. we have to think in advance, which means we have to use our models and our other forms of analysis and market indicators and so on to try to project where the economy is heading over the next 6 to 12 months. on we see the economy is in a self-sustaining recovery, and employment is getting to improve and labor markets are improving, and meanwhile thatnflation is stable at approaching roughly 2%

or so, which i think is where you want to be in the long-term in inflation, at that point we need to begin withdrawing. it is the same probl, i just want to emphasize, it is not a all different from the problem that central banks always face which is when to take away the punch bowl and the only way you can do that is by making projections of the economy and moving sufficiently in advance that you don't stay too easy too long. and we're quite aware of this issue and quite committed to price stabily and we will continue to analyze our models and our forecasts and move well in advance of the times that would -- well in advance of the times that the economy is completely back to full emoyment. >> wl, thank you, mr. chairman. my time is up. i look forward, maybe off the hearing, to pursue some of this with you. >> certainly. >> senator corker. >> thank you, mr. chairman. and chairman, thank you for your testimony and your service.

i appreciate your comments regarding the goldmans report and i know a lot of people may not have seen it, but 47 economists came out quickly thereafter to basically say the goldmans report regarding cutting spending was way off base, and the thing we can do to get our country moving ahead is to begin having some fiscal discipline. i agree with you, we need a long-term plan, can't all happen in one year, but we have to begin at some point and we're workintogether, i hope, to put congress in a straight jacket so that over the course of the next ten years we'll have the discipline we need you talked a little bit with senator crapo about -- about inflation and explicit target and you now have a dual mandate, unlike the european ctral banks, unlike the bank of england. what policy rubs does that create internally or perception issues having the dual mandate that you now have? >> well, it means that we have to look at both sides of the

mandate in making our policy decisions. sometimes that causes a nflict where,ou know, for example, a stagflationary situation where unemployment is too high, but inflation is also too high, currently there is not really that much of a conflict because inflation and employment have been quite low and so accommodative policy has been appropriate in any case. >> i guess at rare times you have high inflation and high unemployment and i think that's what people are concerned abou possiblyappening now. that would create a conflict with that dual mandate, is that correct? >> it would pose a very difficult situation. what chairman volcker demonstrated, i think -- i think we have learned that there is no way to have suained economic growth with high invariable inflation. so keeping inflation low and stable is whatever your mandate is absolutely essential and we are committed to doing that.

>> would it give the - would it give the fed greater credibility if you had the single mandate since in essence i know we had a lot conversations, price stability, i think, by most people is the thing that helps create maximum employment more than anything else. would it help if we clarified that for you? >> well, we, you know, we ha been functioning under the dual mandate. we think it is appropriate and we're not right now seeking any change. congress, of course, you know, can certainly discuss that issue. and we will do whatever congress tells us to do. >> but it does create a policy rub from time to time or it can, they have a bipolar mandate. >> it can. but on the other hand there may be circumstances where a monetary policy can be constructive on the unemployment side and we wouldn't want to ignore that. >> you're lauded for being a great student of the great depression.

and have there, as we have gone through hopefully three-quarters of wi