Bernanke wants Congress to work on a compromise that would lessen the effect of the automatic cuts so as to give the private sector more time to recover and be able to withstand larger government cuts and austerity measures later.
The focus after QE3 quickly shifted to the prospect of the Fiscal Cliff, where the Budget Control Act, which goes into effect on January 1, 2013 unless Congress and the President compromise on a solution to repeal the law.
The compromise legislation includes a procedural trigger so that the provisions only go into effect if the economy continues its recovery, using the Federal Reserve Bank of New York's Coincident index, which is a measure of New York City's economic strength.
The 40% tax rate that Congress agreed to is a compromise between the 45% rate that President Obama was seeking and the 35% rate that was in effect for 2011 and 2012.