Washington Post Staff Writer
Thursday, April 8, 2010
Federal Reserve Chairman Ben S. Bernanke warned Wednesday that Americans may have to accept higher taxes or changes in cherished entitlements such as Medicare and Social Security if the nation is to avoid staggering budget deficits that threaten to choke off economic growth.
“These choices are difficult, and it always seems easier to put them off — until the day they cannot be put off anymore,” Bernanke said in a speech. “But unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth.”
His stern lecture came as the economy is emerging from the worst recession in years, sending the stock market up considerably over the past year and raising public hopes for a return to prosperity. But the economic downturn — with tumbling tax revenue, aggressive stimulus spending and rising safety-net payments such as unemployment insurance — has driven already large budget deficits to their highest level relative to the economy since the end of World War II. This has fueled public concern over how long the United States can sustain its fiscal policies.
The health-care bill signed by President Obama last month has further stoked the national debate over government entitlement programs, though the non-partisan Congressional Budget Office has projected that the legislation would actually reduce future deficits.
Barely two months after Bernanke was confirmed by Congress for a second term following a bruising fight, he used his bully pulpit to tread into an area of economic policy that is usually the province of the president and Congress. He characterized the budget gap as the biggest long-term economic challenge the nation faces, even as he acknowledged that reducing the deficit immediately would…