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	<title>www.The2012Warning.com &#187; US Precipitating their own next crisis</title>
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		<title>U.S. risks crisis without fiscal action: Hoenig</title>
		<link>http://www.the2012warning.com/u-s-risks-crisis-without-fiscal-action-hoenig</link>
		<comments>http://www.the2012warning.com/u-s-risks-crisis-without-fiscal-action-hoenig#comments</comments>
		<pubDate>Wed, 17 Feb 2010 03:15:58 +0000</pubDate>
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		<description><![CDATA[U.S. risks crisis without fiscal action: Hoenig]]></description>
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<p id="lastupdate"><strong>www.The2012warning.com</strong> sends out yet another warning, this time from the Fed Chief in Kansas City, that unless the United States Government takes fiscal action quickly, the government is &#8220;precipitating its own next crisis&#8221;.  That is quite a claim.  It is our hope and prayer that you will listen to the warning.</p>
<p>Feb. 16, 2010, 3:32 p.m. EST</p>
<h1>U.S. risks crisis without fiscal action: Hoenig</h1>
<h2>Kansas City Fed chief calls for pre-emptive strike on tax, spending policy</h2>
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<p id="byline">By <a href="mailto:rschroeder@marketwatch.com">Robert Schroeder</a>, MarketWatch</p>
<p>WASHINGTON (MarketWatch) &#8212; U.S. fiscal policy is on an &#8220;unsustainable course&#8221; and the government must adjust its tax and spending programs or risk a crisis, Kansas City Federal Reserve Bank President Thomas Hoenig said Tuesday.</p>
<p>&#8220;The U.S. government must make adjustments in its spending and tax programs,&#8221; Hoenig said in remarks prepared for delivery at a conference about the budget.</p>
<p>&#8220;It is that simple. If pre-emptive corrective action is not taken regarding the fiscal outlook, then the United States risks precipitating its own next crisis,&#8221; said Hoenig. <a href="http://www.kc.frb.org/speechbio/hoenigpdf/Washington.DC.Fiscal.02.16.10.pdf">Read Hoenig&#8217;s speech.</a></p>
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<h3>News Hub: Bayh&#8217;s Exit Leaves Senate in Play</h3>
<p>Democratic Indiana senator Evan Bayh announced that he would not be seeking re-election, which shocked his party as it wrestles with health care reform. The News Hub panel discusses the implications for Washington.</p>
</div>
<p>Hoenig also said the current outlook for fiscal policy poses a threat to the Fed&#8217;s ability to achieve price stability and long-term growth.</p>
<p>It&#8217;s therefore a threat to the Fed&#8217;s independence, Hoenig said.</p>
<p>&#8220;In time, significant and permanent fiscal reforms must occur in the United States,&#8221; said Hoenig. &#8220;I much prefer this be done well before anyone feels an irresistible impulse to knock on this central bank&#8217;s door.&#8221;</p>
<p>A government faced with rising debt levels must come up with a credible long-term plan to reestablish fiscal balance, Hoenig said.</p>
<p>That plan must be seen as fair, said Hoenig, and those who put it in place must be wiling to disappoint special interests.</p>
<p>&#8220;It means, for example, controlling budget earmarks, trimming subsidies to numerous economic sectors, and resolving our banking problems and the perception that Wall Street is favored over Main Street, all of which would otherwise foster mistrust and cynicism among the public,&#8221; said Hoenig.</p>
<p>Hoening spoke a little more than two weeks after President Barack Obama sent Congress a $3.8 trillion budget blueprint for fiscal year 2011. Obama&#8217;s plan forecasts a record $1.6 trillion deficit in fiscal 2010, but sees the deficit declining to $1.3 trillion in fiscal 2011.</p>
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<div><img id="image201" src="http://s.wsj.net/public/resources/MWimages/MW-AD042_hoenig_MC_20100107132642.jpg" alt="" width="183" height="122" /></div>
<p>Kansas City Federal Reserve President Thomas Hoenig</p>
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<p>Obama wants to set up a commission to study ways to slash the federal deficit.</p>
<p>Hoening cited Congressional Budget Office projections showing the debt reaching two to five times the total national income within the next 50 years. He said that leads to an &#8220;inescapable conclusion&#8221; &#8212; that &#8220;U.S. fiscal policy must focus on reducing this debt buildup and its consequences.&#8221;</p>
<p>Hoenig grabbed attention late last month when he was the lone dissenter from the latest statement about the economy from the Federal Reserve. He called on the Fed to scrap its language to keep rates low for an extended period. But he didn&#8217;t demand an immediate rate hike to end the central bank&#8217;s zero interest rate policy. It was the first dissent in a year. <a href="http://www.marketwatch.com/story/fed-holds-steady-but-is-not-unanimous-2010-01-27">Read more about Fed meeting. </a></p>
<p>Meanwhile, the new president of the Federal Reserve Bank of Minneapolis said Tuesday that the U.S. economic recovery is likely to be slow, and the jobless rate is likely to stay above 8% by the end of next year.</p>
<p>The threat of regulatory changes from Washington is holding down growth, said Minneapolis Fed President Narayana Kocherlakota in a speech to a banking group in St. Paul, Minn.  			<a href="http://www.marketwatch.com/story/feds-kocherlakota-sees-slow-recovery-2010-02-16-135900">Read more about Kocherlakota&#8217;s speech.</a></p>
<p>Robert Schroeder is a reporter for MarketWatch in Washington.</p>
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