Bernanke: Failure To Make Debt Deal Would Be “Calamity”

Posted July 13th, 2011 at 1:10 pm (UTC-5)
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U.S. Federal Reserve Chairman Ben Bernanke says the economy will face “calamity” if congressional Republicans and President Obama cannot reach an agreement to raise the legal limit on borrowing.

He told Congress refusing to increase Washington’s debt ceiling is like having a spending spree with a credit card and then refusing to pay the bill.

Bernanke said without a deal, the nation would eventually default and be forced to cut payments to pensioners, soldiers and others, damaging confidence, hurting jobs, and perhaps throwing the nation back into a severe recession.

Bernanke was reporting to a congressional committee on the state of the U.S. economy. He said U.S. economic growth will pick up in the second half of the year as high prices for energy and fuel ease.

He said growth will probably rise to an annual rate of around 2.8 percent, which is faster than the first few months of this year, but slower than the last quarter of 2010.

Bernanke indicated that the Fed is prepared to take additional steps to stimulate the economy if the current lull in growth continues.

Fed experts say the U.S. unemployment rate will fall from its current 9.2 percent, but not as quickly as previous predictions.