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U.S. Federal Reserve Chairman Ben Bernanke responds to reporters during his final planned news conference before his retirement at the Federal Reserve Bank headquarters in Washington on Dec. 18, 2013.JONATHAN ERNST/Reuters

Only days to go before Christmas, and American policy-makers have wrapped up two small gifts for a weak economy. First, congressional leaders reached a budget deal last week, a compromise between the two parties that forestalls another government shutdown, and also modestly boosts near-term government spending. Then on Wednesday, Ben Bernanke, outgoing head of the U.S. Federal Reserve, put forward a way to begin scaling back the Fed's bond-buying program known as quantitative easing, without rankling the markets.

As Canadians know all too well, when the elephant gets a cold, we tend to sneeze. The Canadian economy is in relatively better shape than our neighbour to the south, with employment in this country above prerecession levels, thanks in part to the good fortune of sitting on a wealth of increasingly valuable natural resources. But the U.S. remains by far our largest trading partner. Its continued weakness is felt across the country.

Nearly five years after the end of the worst downturn since the Great Depression, the U.S. economy remains in remarkably poor health. Unemployment is still stubbornly high, and growth is frustratingly slow. When Mr. Bernanke was asked on Wednesday about what continues to hold back the U.S. recovery, his list of reasons included, as it always does, a finger pointed at Congress.

Congress's sin? Fiscal drag. In plain English, it's been undermining the economy by cutting too much spending, too quickly. Congress has been deflating even as Mr. Bernanke tries to reflate. A study this fall from Macroeconomic Advisors estimated that the U.S. unemployment rate had been pushed 1.4 percentage points higher, thanks to fiscal uncertainty and cuts to government spending.

The budget compromise negotiated by Republican Congressman Paul Ryan and Democratic Senator Patty Murray does what Mr. Bernanke has long urged: It delays tens of billions of dollars' worth of planned spending cuts in 2014 and 2015, and shifts those savings to later years. For example, in 2014, spending will be $45-billion higher than it otherwise would have been, on a total U.S. federal budget of just over $1-trillion.

Why is that little bit of extra spending a modestly good idea? Because in economic policy, timing is everything. The problem the U.S. is facing right now is lack of demand. The Fed is trying to jump-start the U.S. economy, but cutbacks in government spending are leaning in the other direction. Republicans in Congress, who have been especially focused on spending reduction, did not agree to this compromise for economic reasons. But the results look to be mildly economically beneficial just the same.

It strikes many people as paradoxical, but the sharp drop in the U.S. budget deficit since 2010 hasn't been taken as good news at the Fed. It has instead been one of Mr. Bernanke's biggest obstacles.

"People don't appreciate how tight fiscal policy has been," Mr. Bernanke said in his final press conference. By his count, all levels of government in the U.S. employ approximately 600,000 fewer workers than before the recession; in the last downturn, those numbers went up. In a healthy economy near full employment, a reduction in government employment or government spending wouldn't be a problem. It might even be a good idea. But in a depressed economy, it's a drag.

As for the Fed's own steps, on Wednesday it announced that it would begin tapering its bond purchases, slowing the pace from $85-billion (U.S.) a month to $75-billion. The Fed also signalled that it would like to keep marching that total down in the coming months. In the absence of other, counterbalancing policy steps, that could put upward pressure on interest rates – exactly what the Fed does not want, given that its outlook is for unemployment to remain too high, and inflation too low, for years to come.

But as the Fed begins to take away one tool, it has also introduced another. The U.S. central bank may stimulate the economy a bit less through quantitative easing, but it will also try to stimulate a bit more through a promise to keep interest rates lower for longer.

Or as it put it, in central-banker-speak: "The Committee now anticipates… that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5 per cent, especially if projected inflation continues to run below the Committee's 2 per cent longer-run goal."

The Fed has long tried to keep market-set, long-term interest rates low, by promising to keep Fed-set, short-term rates near zero until unemployment hits 6.5 per cent. On Wednesday, it effectively put forward an even lower unemployment trigger, without putting an exact number on it.

None of this will bring any sudden change to the U.S. economic picture. These are not radical moves. But in small, incremental ways, they are likely to keep the U.S. economy moving, however slowly, in the right direction. As Christmas presents go, it's better than two lumps of coal.

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