The Federal Reserve Chairman, Ben S. Bernanke, said 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.”
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 prepared testimony to the Joint Economic Committee of Congress, 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.