While Bernanke believes the U.S. still can avoid a recession, he signaled that the Fed will cut interest rates further if needed to stimulate the economy.
The grim outlook stood in stark contrast with a Commerce Department report released earlier in the week indicating that retail sales rose by 0.3 percent in January... virtually erasing December's losses, when retailers suffered through their worst Christmas shopping season in five years.
And the government reported the U.S. trade deficit declined by 6 percent in 2007 after posting record highs the previous five consecutive years. The improvement came despite soaring oil prices which surpassed 95.00 this week.
Proponents claim bio-based fuels like ethanol help reduce America's dependence on foreign oil. But the alternative fuel is not without its critics. In the past week alone, research conducted at Iowa State University questioned ethanol's ability to create jobs, and a separate Princeton University study claims ethanol actually does more environmental harm than good.
Tim Searchinger, Princeton University: "The biofuels that we are using today substantially increase global warming gasses compared to using gasoline. Or to put it another way, for every mile you drive with corn ethanol, unfortunately, means you are putting twice-as- much pollution into the atmosphere as if you drove just using gasoline."
The conclusions of the study did not sit well with Bob Dinneen, President and CEO of the Renewable Fuels Association, an ethanol industry trade organization.
Bob Dinneen, Renewable Fuels Association: "I think it's a situational analysis. He was looking to see if you could produce biofuels in an unsustainable way and, lo and behold, that's what he found out... One of the assumptions that he used, I believe, was a very low assumption in terms of corn yeild. Well, corn yield is increasing every single year and technology is driving farmers to be more efficient. Our own industry is being more efficient as every new plant comes on-line. The other important factor that he really missed was 'if not biofuels, then what.'"
Almost all of the ethanol produced in the United States is made from corn. The Renewable Fuels Association estimates that last year's domestic production was 6.5 billion gallons. This puts the industry well on its way to producing the 15 billion gallons mandated in the 2007 Energy Bill. But Searchinger believes the carbon dioxide being released is creating a carbon debt that will take more than a century-and-a-half to repay.
Searchinger: "...when you chop down the plants and they decompose or you burn them down or you plow up the soil a lot of that carbon is released back into the atmosphere in the form of carbon dioxide. So that happens quickly, so that means, you get a big big release of global warming gasses very early and then every year you kind of pay off that debt, that carbon debt, by using the ethanol, but in the case of corn ethanol, it would take 167 years according to our calculations, before you paid off the debt. Which is another way of saying that global warming gasses would increase for 167 years.
But Dinneen says Searchinger's study is based on faulty data and that more research is needed.
Dinneen: "We lost a million-and-a-half acres of good farmland to urban sprawl. So, how do you calculate that in any comprehensive analyis of the carbon debt. Searchinger puts it all on ethanol...But biofuels, we are growing the feedstock, its going to be taking CO2 and other greenhouse gasses out of the air. It has the potential of paying back that carbon debt. Our continued reliance on oil and coal is not an answer. There you're taking carbon out of the air and that's a debt you can never pay back."