Fed Chairman Concerned By Growing Deficit

The Obama administration is projecting budget deficits that average well over a trillion dollars for the next three years. Appearing before the House Budget Committee, Fed Chairman Ben Bernanke warned members of Congress they need a plan to rein in these deficits once the recession is over.

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Federal Reserve Chairman Ben Bernanke is warning members of Congress they need to come up with a plan - a plan to reign in huge budget deficits - once the recession is over. Bernanke was on Capitol Hill yesterday.

We have more this morning from NPR's John Ydstie.

JOHN YDSTIE: The Obama administration is predicting budget deficits that average well over a trillion dollars for the next three years. Bernanke said deficits of that size are not sustainable.

Mr. BEN BERNANKE (Chairman, Federal Reserve): We as a country are going to have to make some hard choices. We can't expect to continue to borrow, certainly not 12 percent of GDP, but not even four or five percent of GDP indefinitely. And so we need to make a plan - some decisions about how we are going to bring the budget closer to the balance over the medium term.

YDSTIE: Bernanke said if lawmakers put off the job too long, they could be forced to pass draconian budget cuts or tax hikes in the future. Concerned lenders could also become reluctant to provide credit to the U.S. government. But Bernanke said he didn't expect that to happen.

Mr. BERNANKE: I believe there is a great deal of confidence in the markets that U.S. government will take the necessary steps to restore fiscal discipline. But it's essential that this body and the Congress in general do that hard work and get that done.

YDSTIE: The Fed chairman acknowledged investor concerns about the high level of government borrowing have contributed to a recent rise in the long-term interest rates. Bernanke repeated the Fed's view that the economy is stabilizing and should turn up later this year. He cautioned that growth probably will be slow. So he said it's likely unemployment will continue to rise well into next year.

John Ydstie, NPR News, Washington.

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