WASHINGTON — The Federal Reserve chairman said Wednesday that the government must begin to make “difficult choices” to address its gaping deficits and warned that “postponing them will only make them more difficult.”
The chairman, Ben S. Bernanke, said that a “credible plan” for reining in federal deficits could help long-term interest rates and raise consumer and business confidence. “Although sizable deficits are unavoidable in the near term, maintaining the confidence of the public and financial markets requires that policymakers move decisively to set the federal budget on a trajectory toward sustainable fiscal balance,” he said.
In testimonyto the Joint Economic Committee of Congress, Mr. Bernanke did not address monetary policy or say how long the Fed would keep short-term interest rates near zero.
He also did not specify whether he believed the government should raise taxes, make cuts to Social Security and other benefits programs, or do something else. But his admonitions could help give momentum to the bipartisan fiscal commission created by President Obama.
Under questioning from Senator Sam Brownback, Republican of Kansas, Mr. Bernanke said the nation’s debts and deficits could at some point alarm investors and raise long-term interest rates and the government’s borrowing costs.