Bernanke Urges U.S. Leaders to Cut National Debt
By MacKenzie C. Babb
Washington - Federal Reserve Chairman Ben Bernanke is calling on U.S. leaders to achieve economic and financial stability by putting the United States' fiscal policy on a sustainable path that ensures steady reduction of public debt.
Calling shrinking the U.S. deficit "a top priority," Bernanke said fiscal policymakers should address fiscal sustainability while being careful to avoid unnecessarily impeding the current economic recovery.
"Fortunately, the two goals of achieving long-term fiscal sustainability and avoiding additional fiscal headwinds for the current recovery are fully compatible. Indeed, they are mutually reinforcing," Bernanke said in testimony before the Senate Budget Committee in Washington February 7.
The chairman said a more robust recovery will lead to lower deficits and debt, and a plan for fiscal sustainability will keep longer-term interest rates low and improve household and business confidence, thereby supporting improved economic performance in the short term.
"Fiscal policymakers can also promote stronger economic performance in the medium term through the careful design of tax policies and spending programs," Bernanke said. He called for new tax and spending policies to increase incentives to work and save, encourage investments in workers' skills, stimulate private growth, promote research and provide necessary public infrastructure.
"Although we cannot expect our economy to grow its way out of its fiscal imbalances, a more productive economy will ease the trade-offs that we face and increase the likelihood that we leave a healthy economy to our children and grandchildren," Bernanke said.
The chairman commended the U.S. economy's gradual recovery from deep recession since 2009, but he said that even though "conditions have certainly improved over this period, the pace of the recovery has been frustratingly slow" for the millions unemployed.
"Fortunately, over the past few months, indicators of spending, production and job market activity have shown some signs of improvement," Bernanke said.
He cited economic projections released in late January by the Federal Open Market Committee, the policymaking arm of the U.S. central bank, as pointing to stronger growth in 2012 than in 2011, but said the outlook remains uncertain and close monitoring of economic developments is still needed.
The committee's economic and policy projections are subject to future revision in light of evolving economic and financial conditions, the chairman said, adding the Federal Reserve Board will continue to monitor economic conditions and adjust its policies accordingly.
(This is a product of the Bureau of International Information Programs, U.S. Department of State.)