Bernanke: Debt Limit "Wrong Tool"
POLITICO Federal Reserve Chairman Ben Bernanke on Tuesday again urged congressional Republicans to support an increase in the debt ceiling ahead of the early August deadline set by Treasury Sec. Tim Geithner, saying that they are using the “wrong tool” to cut spending by linking it with the debt limit. Republicans’ threats to block a vote on raising the debt ceiling until they reach a deal with the White House and congressional Democrats on spending cuts could end up backfiring and doing serious economic damage. Read more: http://www.politico.com/news/stories/0611/57009.html#ixzz1PLsDDIyo
Federal Reserve Chairman Ben Bernanke on Tuesday again urged congressional Republicans to support an increase in the debt ceiling ahead of the early August deadline set by Treasury Sec. Tim Geithner, saying that they are using the “wrong tool” to cut spending by linking it with the debt limit.
Republicans’ threats to block a vote on raising the debt ceiling until they reach a deal with the White House and congressional Democrats on spending cuts could end up backfiring and doing serious economic damage.
“I fully understand the desire to use the debt limit to force a necessary and difficult fiscal policy adjustment, but the debt limit is the wrong tool for that important job,” Bernanke said at a meeting on the deficit hosted by the Committee for a Responsible Federal Budget and the New America Foundation.
Congressional inaction on the debt ceiling could cause “severe disruptions” in financial markets, he said. “Failing to raise the debt ceiling in a timely way will be self-defeating if the objective is to chart a course for the better fiscal situation for our nation.”
While Bernanke warned against tying an increase in the debt ceiling to spending cuts, he did urge Congress and the Obama administration to reach a deal toward greater fiscal responsibility. A budget deal, he said, should “reform the government’s tax policies and spending priorities so they not only reduce deficit but also enhance the long-term growth potential of our economy.”
