ONE of the few people to come out of the economic crisis well is Ben Bernanke, chairman of the Federal Reserve, America’s central bank. He won acclaim for his decision to pump trillions of dollars into the American economy by providing liquidity to frozen financial markets and, from late 2008, by buying government bonds and mortgage-backed securities, or “quantitative easing” (QE). By common consent, these measures helped avert global economic disaster.

Now there is pressure for Mr Bernanke to work his magic again. Although America’s economy no longer looks on the point of collapse, it has failed to return to healthy growth. Unemployment, at 9.6%, is five percentage points higher than it was before the crisis and GDP is not growing fast enough to bring the jobless rate down. This economic slack is pushing inflation worryingly low. Core consumer prices rose a mere 0.8% over the past year. The Fed is therefore expected to announce a new round of asset purchases, widely known as QE2, at the end of its November meeting next week.

This round is unlikely to work as well as the last one. Financial markets are healthier than they were two years ago, so there is less scope for the Fed to give the economy a boost by providing extra liquidity. QE works in part by bringing down long-term interest rates, but the more you do, the less the incremental effect is likely to be. There are also potentially nasty side-effects. Fed purchases should help America’s economy by pushing asset prices up and the dollar down, but they may lead to a damaging rise in commodity prices and fuel asset bubbles in emerging economies. A big jump in the size of the Fed’s balance-sheet may also increase fears that quantitative easing could stoke inflation which could prove hard to control.

Despite these risks, QE2 is the right thing to do. Deflation is a bigger worry than inflation right now. Deflation would make it much harder for Americans to shake off their debts; and a combination of deflation and stagnation in America would be devastating for the world. Since underlying inflation is threatening to sink towards zero, the Fed is right to act pre-emptively.

Lower expectations, more help

The bigger danger is not that the costs of QE2 will outweigh the benefits, but that America’s politicians will expect too much of it. For although QE is a potent weapon against deflation, its power to support recovery is limited. It can help growth by weakening the dollar and thus boosting exports. But with many households unable to borrow, others keen to pay down debt and many businesses swimming in cash, lower interest rates are likely to have only a modest effect.

Rather than rely on Mr Bernanke alone, politicians should complement QE2 with more short-term fiscal stimulus. The first stimulus is now expiring and much of its contribution was cancelled out by the shrinking of state and local-government budgets. A new fiscal boost combined with targeted structural measures—encouraging banks to write down mortgage principal, for instance, so that homeowners with underwater mortgages can move house to look for work—would bring unemployment down faster. Yet Congress is reluctant to act because increasing the deficit is politically toxic.

Americans are right that government debt is a serious long-term problem. But growth is a serious short-term problem. The two can be addressed simultaneously, by adopting a credible medium-term deficit-reduction plan of the sort that Britain’s government has announced. Doing that will take courage, for it means coming up with a scheme for cutting entitlements to pensions and health care that will not go down well with voters. But if ever there were a moment for courage, this is it.