Bernanke: Time To Act On Red Ink
"Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke said.
In May it was reported that the deficit for the current budget year will rise by $89 billion to above $1.8 trillion - about four times the record set just last year. The unprecedented red ink flows from the deep recession, the Wall Street bailout, the cost of President Barack Obama's economic stimulus bill, as well as a structural imbalance between what the government spends and what it takes in
The recession has taken a bite out of tax revenues paid by people and companies. At the same time, the government's spending has risen, paying billions to shore up banks, help the unemployed and others hurt by the downturn, the longest since World War II. For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration's plan.
Bernanke said that such forceful government intervention to fight the worst financial crisis since the 1930s and lift the U.S. out of recession was "necessary and appropriate" even though it worsened the nation's budget deficit.
At the same time, he cautioned politicians: "Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth."
The chairman didn't offer specific recommendations on what steps they should take to bring the deficits under control.
Ben Bernanke Addresses The Need To Restore Fiscal Balance