Federal Reserve Chair Ben Bernanke gave testimony before the Joint Economic Committee and the doves fell from the sky. Bernanke cut short Wall Street's addict like demand for more quantitative easing and instead suggested a host of policies to boost hiring and real economic output.

On the labor markets, Bernanke's testimony validated our analysis, that one cannot blame the pathetic jobs market on the weather.

More-rapid gains in economic activity will be required to achieve significant further improvement in labor market conditions.

In fact, Bernanke suggested the next FOMC meeting discussion question will ask: Will there be enough growth going forward to make material progress on the unemployment rate?  This is good, Bernanke realizes the #1 threat to the U.S. economy is the jobs crisis.

The Fed Chair also warned on the ongoing sovereign debt crisis in the Eurozone:

The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely

The FOMC expects to keep the Federal Funds rate at the same level until 2014.

The target range for the federal funds rate remains at 0 to 1/4 percent, and the Committee has indicated in its recent statements that it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate at least through late 2014.

Bernanke also warned about the fiscal cliff, the long term budget deficit crisis, mentioned specially health care costs as the biggest threat.

Yet for the short term Bernanke actually got a little specific on what Congress should do to stimulate much needed economic growth:

To the fullest extent possible, federal tax and spending policies should increase incentives to work and save, encourage investments in workforce skills, stimulate private capital formation, promote research and development, and provide necessary public infrastructure.

Below is Bernanke's press conference, which is worth watching in it's entirety. Some financial reporters almost demand the FOMC enact more quantitative easing, as if Bernanke alone was stopping it. Bernanke implies quantitative easing will raise inflation, in particular commodity prices from the below press conference quotes:

We are not in deflation. We are not Japan.

Does it make sense to increase inflation to reduce the unemployment rate? That is reckless.

There ya go Wall Street. Quantitative easing is not going to abate the jobs crisis. Stop demanding your crack cocaine for the stock market and instead invest in the real economy and start hiring people!

On Budget deficits Bernanke said:

It is imperative Congress to act for both requirements of fiscal policy

Here is what Bernanke outlined in his speech for what Congress needs to do.

The economy's performance over the medium and longer term also will depend importantly on the course of fiscal policy. Fiscal policymakers confront daunting challenges. As they do so, they should keep three objectives in mind. First, to promote economic growth and stability, the federal budget must be put on a sustainable long-run path. The federal budget deficit, which averaged about 9 percent of GDP during the past three fiscal years, is likely to narrow in coming years as the economic recovery leads to higher tax revenues and lower income support payments. Nevertheless, the Congressional Budget Office (CBO) projects that, if current policies continue, the budget deficit would be close to 5 percent of GDP in 2017 when the economy is expected to be near full employment.3 Moreover, under current policies and reasonable economic assumptions, the CBO projects that the structural budget gap and the ratio of federal debt to GDP will trend upward thereafter, in large part reflecting rapidly escalating health expenditures and the aging of the population. This dynamic is clearly unsustainable. At best, rapidly rising levels of debt will lead to reduced rates of capital formation, slower economic growth, and increased foreign indebtedness. At worst, they will provoke a fiscal crisis that could have severe consequences for the economy. To avoid such outcomes, fiscal policy must be placed on a sustainable path that eventually results in a stable or declining ratio of federal debt to GDP.

Even as fiscal policymakers address the urgent issue of fiscal sustainability, a second objective should be to avoid unnecessarily impeding the current economic recovery. Indeed, a severe tightening of fiscal policy at the beginning of next year that is built into current law--the so-called fiscal cliff--would, if allowed to occur, pose a significant threat to the recovery. Moreover, uncertainty about the resolution of these fiscal issues could itself undermine business and household confidence. Fortunately, avoiding the fiscal cliff and achieving long-term fiscal sustainability are fully compatible and mutually reinforcing objectives. Preventing a sudden and severe contraction in fiscal policy will support the transition back to full employment, which should aid long-term fiscal sustainability. At the same time, a credible fiscal plan to put the federal budget on a longer-run sustainable path could help keep longer-term interest rates low and improve household and business confidence, thereby supporting improved economic performance today.

A third objective for fiscal policy is to promote a stronger economy in the medium and long term through the careful design of tax policies and spending programs. To the fullest extent possible, federal tax and spending policies should increase incentives to work and save, encourage investments in workforce skills, stimulate private capital formation, promote research and development, and provide necessary public infrastructure. Although we cannot expect our economy to grow its way out of federal budget imbalances without significant adjustment in fiscal policies, a more productive economy.

Will Congress act intelligently and put together fiscal policy as outlined above? Given their history, of course not, yet this is what needs to happen to boost the economy.

Say what you will about dear ole' Ben, but his basic economic policy suggestions are dead on.