Newspaper article The Christian Science Monitor

Bernanke to Senate: If You Want to Fix Job Deficit, Don't Forget Budget Deficit

Newspaper article The Christian Science Monitor

Bernanke to Senate: If You Want to Fix Job Deficit, Don't Forget Budget Deficit

Article excerpt

Federal Reserve Chairman Bernanke suggests that the Senate to link a jobs bill with a credible plan to cut the budget deficit.

Federal Reserve Chairman Ben Bernanke offered some cautionary advice for Congress Thursday: New stimulus spending will do better at creating jobs if lawmakers can also chart a course toward lower federal budget deficits.

His comment touched on two issues that have emerged as top concerns for American voters - the dearth of jobs and untamed government deficits.

Virtually everyone agrees these are both serious problems for the nation. What's controversial is the question of whether the two problems are linked. Mr. Bernanke said, in effect, that they are.

Questions about jobs came up repeatedly during two days of the Fed chairman's semiannual testimony in Congress. On Thursday, Day 2, Sen. Evan Bayh (D) of Indiana asked what policymakers can do to spur a revival of job growth.

The backdrop for his query: Congress is considering a "jobs bill," and possibly a series of small job-related measures, aimed at that goal. These would follow the larger, $787 billion economic stimulus program signed by President Obama a year ago.

Bernanke replied that if Congress tries more spending on such stimulus measures, "it would be good to combine that" with a clear plan to get federal budgets under better control.

In response to another question, he said federal budget deficits are on track to equal 4 to 7 percent of the nation's gross domestic product annually, even after the economy recovers. "That is not a sustainable number," Bernanke said. "A rule of thumb is that ... you need to have deficits more on the order of 2.5 to 3 percent" of GDP, in order to keep public debts from spiraling out of control.

Bernanke wasn't urging an immediate cutback in government spending - a move that most economists say would be unwise given the weak state of the economy now. …

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