Bernanke, the Bedfellow of Republicans, Calls for Cuts in Deficit

[Nelson Muntz]

http://www.huffingtonpost.com/2010/04/27/bernanke-cut-deficit-or-d_n_553396.html

Failing to curb federal budget deficits would do "great damage" to the U.S. economy in the long run, Federal Reserve Chairman Ben Bernanke warned Tuesday.

Bernanke again urged the White House and Congress to come up with a credible plan to reduce the nation's red ink, which hit a record $1.4 trillion last year.

Failing to do so would push interest rates higher – not only for Americans buying cars, homes and other things – but also for Uncle Sam to service its debt payments, he said.

All that would sap national economic activity and could cause employers to cut back on hiring, Bernanke said.

The Fed chief made his most urgent call yet to get the nation's fiscal house in order. His plea came in prepared remarks to the first meeting of President Barack Obama's commission to tackle the soaring deficit.

"The path forward contains many difficult trade-offs and choices, but postponing those choices and failing to put the nation's finances on a sustainable long-run trajectory would ultimately do great damage to our economy," Bernanke said.

The nation's budget deficit swelled to a record high last year as the recession took a big bite out of tax revenues, while spending rose to stimulate the economy and provide relief to struggling Americans.

Obama wants the panel to come up with a plan to cut the deficit so that it is no bigger than $550 billion by 2015, an amount equal to about 3 percent of the total U.S. economy. That would require deficit savings in the range of $250 billion or more.

The options for slicing the deficit – cutting spending on popular entitlement programs like Social Security and Medicare and raising taxes – will be difficult for the White House and Congress to sell to the American public.