News / USA

US Central Bank Chief: Debt Ceiling Must be Raised

Federal Reserve Chairman Ben Bernanke (file photo)
Federal Reserve Chairman Ben Bernanke (file photo)
Michael Bowman

The chairman of the U.S. central bank says economic and fiscal ruin would result from a failure by Congress to raise the limit on the federal government's ability to borrow money and service America's national debt.

For years, Federal Reserve Chairman Ben Bernanke has warned of the dangers of failing to confront fiscal challenges and meet fiscal responsibilities. Perhaps his most-pointed comments to date came Tuesday in describing the perils of delay in raising the federal debt limit, which could cause the U.S. government to default on its obligations to lenders.

“Even a short suspension of payments on principal or interest on the Treasury’s debt obligations would cause severe disruptions in financial markets, induce ratings downgrades of U.S. government debt, create fundamental doubts about the credit worthiness of the United States, and damage the special role of the [U.S.] dollar and of Treasury securities in global markets," said Bernanke. "Interest rates would likely rise, slowing the recovery and, perversely, worsening the deficit problem.”

Bernanke spoke at a Washington conference on America’s debt crisis sponsored by the bipartisan public policy group, the Committee for a Responsible Federal Budget. The Federal Reserve chairman admitted that no one relishes the idea of allowing the U.S. government to borrow additional money when the national debt already exceeds $14 trillion. But he noted that additional funds are needed to cover fiscal commitments already made by Republican and Democratically-controlled Congresses and administrations alike.

The United States is bumping up against the current federal borrowing limit of $14.2 trillion. President Barack Obama and Democrats on Capitol Hill have urged a prompt raising of the debt ceiling as a painful but necessary step. But many Republican legislators are either accusing Democrats of hyping the potential dangers of default, or insisting that federal spending be cut as a condition for a debt ceiling vote.

Also appearing at the debt conference was House Budget Committee Chairman Paul Ryan, who portrayed the issue as one of the few tools available to Republicans to pressure what he sees as spendthrift Democrats in the Senate and the White House.

“Unfortunately, our partners in the Senate have chosen not to do a budget," said Ryan. "We [House Republicans] have put our plan out there, but the budget process is done. And that is why the debt limit is the only other train in the station left to get any kind of fiscal controls out of Congress, and that is why you have these talks revolving around the debt limit.”

Many participants at the debt conference stressed that both political parties bear responsibility for America’s fiscal woes. Democratic Senator Mark Warner of Virginia said he cannot believe that anyone of either party would even consider allowing the United States to default on its debt obligations.

“I do not know what economic bible they look at when the United States defaults, that somehow that could be a good proposition. When right now the market has already priced the chance of our default as higher than the chance of Mexico, the Philippines, Panama," said Warner. "They are better credit risks than the United States government? Everything else that we talk about in Washington pales in comparison to this issue.”

Warner is part of a bipartisan group of senators working to bridge differences on trimming the federal deficit and reducing the country’s debt burden. Another member of the group, Republican Senator Mike Crapo of Idaho, noted that raising the debt ceiling is but the first step of a longer march to fiscal sanity.

“I do believe we will get to a deal on the debt ceiling at some point, and it will not be pretty when it happens," said Crapo. "But when it is over, we will still have a debt crisis in America. And we will still need to be putting together a major paradigm shift in America to help us get onto a right path.”

In general, Democrats favor modest spending restraint and higher federal taxes on the wealthy to improve America’s fiscal balance. Republicans reject tax hikes and insist on deep spending cuts, along with transforming programs that provide income and medical coverage for retirees. Many economists believe both lower government spending and higher tax revenues will be needed to bridge the nation’s budget gap and, ultimately, trim the national debt. But a bipartisan formula for doing so remains elusive.

In the meantime, America skates closer to a potential debt default with each passing day.

You May Like

For Lebanon-based Refugees, Desperation Fuels Perilous Passage

In a war that has caused an estimated three million people to flee Syria, efforts to make perilous sea journey in search of asylum expected to increase More

South African Brewer Tackles Climate Change

Mega-brewer SAB Miller sent delegates to climate summit in Peru, says it is one of many private companies taking their own steps to fight climate change More

Indonesia Reports Increase in Citizens Joining Islamic State

Officials say more than 350 of its citizens are now in Syria or Iraq to fight with Islamic State - 50 more than last month More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Will Pakistan School Shooting Galvanize Pakistan Against Extremism?i
X
Ayesha Tanzeem
December 17, 2014 11:54 AM
The attack on a military school in Pakistan’s northwest city of Peshawar left 141 dead, including 132 children. Strong statements of condemnation poured in from across the world. The country announced three days of mourning, and the leadership, both political and military, promised retribution. VOA's Ayesha Tanzeem looks at how likely the Pakistani government is to clamp down on all extremist groups.
Video

Video Will Pakistan School Shooting Galvanize Pakistan Against Extremism?

The attack on a military school in Pakistan’s northwest city of Peshawar left 141 dead, including 132 children. Strong statements of condemnation poured in from across the world. The country announced three days of mourning, and the leadership, both political and military, promised retribution. VOA's Ayesha Tanzeem looks at how likely the Pakistani government is to clamp down on all extremist groups.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video Turkey's Authoritarianism Dismays Western Allies

The Turkish government has been defiant in the face of criticism at home and abroad for its raids targeting opposition media. The European Union on Monday expressed dismay after President Recep Tayyip Erdogan lashed out at Brussels for criticizing his government's action. Turkey's bid to be considered for EU membership has been on hold while critics accuse the NATO ally of increasingly authoritarian rule. Zlatica Hoke reports.
Video

Video US-China Year in Review: Hong Kong to Climate Change

The United States is pushing for a code of conduct to resolve territorial disputes in the South China Sea as it works to improve commercial ties with Beijing. VOA State Department correspondent Scott Stearns reports on a year of U.S. policy toward China from Hong Kong to climate change.
Video

Video Japanese Leader’s Election Win Raises Potential for Conflict with Neighbors

Japan’s Prime Minister Shinzo Abe and his allies easily won a two-thirds majority in parliament Sunday, even though the country has slipped into recession under his conservative policies. VOA’s Brian Padden reports from Seoul, that the prime minister’s victory will empower him to continue economic reforms but also pursue a nationalist agenda that will likely increase tensions with Japan’s neighbors.
Video

Video Nuba Mountain Families Hide in Caves to Escape Aerial Bombings

Despite ongoing peace talks between Sudan's government and the rebel Sudan People’s Liberation Movement-North, or SPLM-N, daily aerial attacks continue in South Kordofan province’s Nuba Mountains. Adam Bailes was there and reports for VOA that government forces are targeting civilian areas, rather than military positions, with their daily bombardments.

All About America

AppleAndroid