Bernanke Says the Federal Debt Is ‘Unsustainable’

Bernanke Says the Federal Debt Is ‘Unsustainable’

By SEWELL CHAN
Published: June 9, 2010

WASHINGTON — The chairman of the Federal Reserve, Ben S. Bernanke, warned on Wednesday that “the federal budget appears to be on an unsustainable path,” but also recognized that the “exceptional increase” in the deficit had been necessary to ease the recession.

Mr. Bernanke’s comments before a hearing of the House Budget Committee, reiterated his view that the economic recovery would likely be slow and painful for many Americans. The Fed projects gross domestic product, the broadest measure of economic activity, to rise about 3.5 percent this year — a pace barely above that needed to keep pace with the growth in the labor force.

Mr. Bernanke noted some improvements in consumer spending — particularly on durable goods — and in business investments in software and equipment, but also cautioned that “underlying housing activity appears to have firmed only a little since mid-2009, with activity being weighed down, in part, by a large inventory of distressed or vacant existing houses and by the difficulties of many builders in obtaining credit.”

http://www.nytimes.com/2010/06/10/business/economy/10fed.html?hp