Federal Reserve Chair Bernanke Agrees With Rep. Young That Congress Must Develop Coherent Plan To Address U.S. Debt

Press Release

During testimony before the House Budget Committee on Wednesday, Federal Reserve Chairman Ben Bernanke agreed with statements made by Rep. Todd Young (R-IN) that the U.S. must develop a coherent plan to address U.S. debt in order to avoid economic turmoil currently experience by several European countries.

After noting that Japan, despite several economic indicators that mirror the United States, recently had their credit rating downgraded by Standard and Poor's largely because of lack of a plan to deal with long term debt, Young questioned Bernanke on whether or not the U.S. could soon see a similar downgrade.

"Here in this country, like Japan, we have very low interest rates as compared to recent history, our own deficits are adding to our debt at a remarkable rate, and we too have no coherent plan to deal with this, at least in the long term," said Young. "What are the main indicators we need to monitor…in order to avoid a crisis?"

Bernanke responded that in addition to normal indicators like ratio of debt to gross domestic product (GDP), a plan to deal with that debt can keep the economy stable.

"Well we already have a considerable increase in our debt-to-GDP ratio," said Bernanke. "We're approaching the levels where some of the countries in Europe are that are having very serious problems. The bond markets are looking not only at the debt-to-GDP number, they are looking, as you mentioned, at the plan. "Does the country have a plan?', "Do they have the political will?', and so on. I think if we demonstrate that we have the political will, the markets will be quite forgiving."

In his first month in office, Young has consistently made debt and deficit reduction a priority as a means to spur the economy and create jobs. On Thursday, Congressional Budget Office Chairman Doug Elmendorf will testify before the Budget Committee, followed next week by President Obama's Office of Management and Budget Director Jack Lew, and Treasury Secretary Tim Geithner. Young plans on focusing on similar issues in those hearings.

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