PhillyDeals: Bernanke says economy needs nourishment

The United States is a dangerously fat man who is hungry because he hasn't had a meal for too long.

And his doctors can't agree. Dr. Democrat tells him to limp to the nearest McDonald's before he keels. Dr. Republican says he'll die if he doesn't keep on his diet: No fat, no starch.

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DON COKER /Columbus Ledger-Enquirer

Federal Reserve boss Ben S. Bernanke on Friday joined the break-your-fast camp. "In the short term, putting people back to work reduces the hardships," he said in a speech. "In the longer term, minimizing the duration of unemployment supports a healthy economy" because it gets harder to find work the longer you're out.

In Bernanke's telling, the Fed is out of remedies; the private sector is hiring too slowly; the government is the people's hope. Except it's split, and stalled.

Republicans are right, he said, that "U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income" will fall, not rise, from now on. Or else "the finances of the federal government will inevitably spiral out of control, risking severe economic and financial damage" as we try to pay money we won't have to keep old people on Social Security and Medicare.

But, Bernanke added, we can't afford to squeeze the budget so hard it cracks the "fragile" economic recovery. Governments usually spend more, not less, when times are tough; but our budget-conscious public agencies are laying off workers, canceling the slow gains from private employers.

There's still time, he said, "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."

He urged the government to "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."

That first part sounds like more tax breaks. But "promote" and "provide" means raising and spending more, not less - which is what the president and Democrats in Congress want, but Republicans haven't.

Do it, said Bernanke. And no more stupid Congress-vs.-White-House double-dog-dare-you shows: "This country would be well-served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well," freaking out U.S. manufacturers so they don't hire, as the Philadelphia Federal Reserve's summer survey found, and Chinese bond buyers, who make it possible to pay our bills.

Bernanke's final advice: "Set clear and transparent budget goals, together with budget mechanisms to establish the credibility of those goals." And bring the public along: Talk straight to Americans about "the difficult choices that are needed."

So the nation can finally get something sustaining, while still losing weight.

Tax that?

Main Line lawyer Mark D. Schwartz, a onetime Harrisburg and City Hall Democratic insider who has grown critical of Philadelphia's political-business establishment, on Friday wrote to Internal Revenue Service Commissioner Douglas H. Shulman urging "an investigation of the Philadelphia's Children First Fund," the tax-exempt public-school support nonprofit, and the $405,000 it raised toward former city schools boss Arlene Ackerman's severance.

Schwartz called the severance collection "a scheme to solicit and collect tax-exempt donations to be distributed as income to an unrelated individual for her sole benefit." He wrote that doesn't fit the Fund's stated goal of helping the city schools' "predominantly low-income and historically underserved" students.

The Fund raised $1.4 million in 2009-10, down from $2.4 million in 2008-09, "to facilitate organizational and personal giving to create a permanent source of philanthropic capital to the School District of Philadelphia, its leaders, its teachers, and its students," it said in its yearly tax-exemption report.

Schwartz's letter called the Fund's severance collection "a clear abuse by and of a nonprofit," and asked the IRS to "investigate the 'charity' " and those who helped it raise funds for Ackerman, "with a view towards withdrawing the charitable status of this entity and disallowing charitable deductions made by its contributors." He copied the letter to state Attorney General Linda L. Kelly.

The IRS grants tax-exempt charity status to educational organizations. Conditions include that "no part of the net earnings" may benefit "any private shareholder or individual."

The fund's office didn't return calls Friday.


Contact columnist Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or @PhillyJoeD on Twitter.