WASHINGTON (MNI) – The following is a transcript of comments by
Federal Reserve Chairman Ben Bernanke during the ongoing news
conference:

I have advocated that the negotiations about the budget focus on
the longer term, say 10 years, which is the budget window, or even
longer if you’re taking into blth entitlement reform, for example. By
taking a long run aspect we can help the economy by reducing interest
rates that may rise suddenly, we may help increase confidence in the
households and businesses so ink it’s desirable that we take strong
action to lower our budget deficits over the longer term. In doing that
I think it would be best not to, in light of the weakness of the
recovery, it would be best not to have sudden and sharp fiscal
consolidation in the near term.

That doesn’t do so much for the long-run budget situation, it’s a
negative for growth … . I hope that the congressional negotiators will
take a longer-term view.

—

I don’t think that sharp, immediate cuts in the deficit would
create more jobs. I think in the short run that we’re seeing already a
certain amount of fiscal drag coming from state and local governments
from the withdrawal of previous federal stimulus, so I think in the
short run, you know, the fiscal tightening is at best neutral and
probably somewhat negative for job creation.

I think what people will understand, should understand is that our
budgetary problems are long-run in nature, the projections made by the
CBO, for example, talk about where our debt to GDP ratio will be in
2020, 2025 and so on. That doesn’t mean we should wait to act, the
sooner we can act the better.

The most efficient and effective way to address our fiscal problems
— and, again, I think this is extremely important — is to take a
longer run perspective not to focus the cuts heavily on the near term
but by taking a perspective and making a credible plan for reducing
future deficits will lower interest rates or prevent them from rising
and we will increase confidence and that could be constructive.

If it’s entirely focused on the near term I don’t think that’s the
optimal way to proceed.

** Market News International Washington Bureau: 202-371-2121 **

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