Fed Chair Calls for Cuts to Record Deficit

Federal Reserve Chairman Ben Bernanke on Monday called for the United States to eventually whittle down its record-high budget deficits and for countries like China to get their consumers to spend more, moves that would help combat skewed global trade and investment flows that contributed to the financial crisis.

Bernanke's remarks to a Fed conference in Santa Barbara, Calif., comes just days after the federal government on Friday that ended Sept. 30. The previous year's deficit was $459 billion.

The Fed chief's comments were aimed at reducing global imbalances, and echo pledges made by leaders of the Group of 20 nations at their summit in Pittsburgh last month.

"As the global economy recovers and trade volumes rebound, however, global imbalances my reassert themselves," Bernanke warned. For the United States' part, "the most effective way" to boost national savings in this country "is by establishing a sustainable fiscal trajectory, anchored by a clear commitment to substantially reduce federal deficits over time," Bernanke said in prepared remarks. He didn't suggest ways to do so.

And, for trade surplus countries like China and most Asian economies, they need to get their consumers to spend more and relay less on export-led growth, Bernanke said.

"In large part, such action should focus on boosting consuption," Bernanke said