Federal Reserve Chairman Ben S. Bernanke today urged Congress to do more to cut the size of the deficit or risk severe damage to the economy.
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth," he told the House Budget Committee.
He noted that current deficit projections of $1.8 trillion for this fiscal year before declining to $900 billion by 2011.
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"In particular, over the longer term, achieving fiscal sustainability-defined, for example, as a situation in which the ratios of government debt and interest payments to GDP are stable or declining, and tax rates are not so high as to impede economic growth-requires that spending and budget deficits be well controlled," he said.
Bernanke reiterated his earlier predictions that the economy will bottom out soon and begin picking up later this year. He warned, however, that a relapse of problems in the financial sector could cause the recovery to stall.
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