Federal Reserve Chairman Ben Bernanke cautioned legislators to anticipate a “somewhat dark” U.S. government’s budget outlook Thursday. He stressed the importance of Congress coming to a decision on how best to cut down deficit.
Bernanke’s statement was in response to an inquiry relating to the budget impact of the recently passed health-care reform bill. The Chairman skirted the question diplomatically choosing not to “second guess” the Congressional Budget Office.
“It would be very useful if there could be a bipartisan, concerted effort to explain, demonstrate and decide how the government is going to achieve a more sustainable fiscal trajectory,” Bernanke said before the House Financial Services Committee today.
For the fiscal year that ended with September, the budget deficit hit a record $1.4 trillion, pulled higher by T.A.R.P., declining tax revenue and the continued fiscal support of big banks and American automakers.
Bernanke reminded lawmakers that closing the budget deficit did not happen immediately but that it would be wise to move in that direction.
“There’s a reason for the big deficit,” he said. “I do not think it is desirable or possible to get rid of it in the next year or two.”
He reminded that though it is not immediately pressing that to continue to ignore it could encourage investors to lose faith in the recovery, adversely affecting monetary policy should fiscal balance become unattainable.
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