Bernanke: Big budget deficits could hurt economy later on; calls for plan to reduce them

Fed boss: Budget deficits could hurt economy

PROVIDENCE, R.I. — Federal Reserve Chairman Ben Bernanke says the economy could be hurt if Congress and the White House fail to curb the nation’s huge budget deficits in the coming years.

Bernanke, in prepared remarks Monday, reiterated his belief that the government shouldn’t raise taxes or slash spending now because the economic recovery is still too fragile.

But failing to bring the deficits under control could endanger the economy in the long run, he warned. Exploding budget deficits can lead to higher interest rates for people buying homes and cars, and for businesses buying equipment or expanding operations. That could crimp Americans’ spending and slow economic growth.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

PROVIDENCE, R.I. (AP) — Federal Reserve Chairman Ben Bernanke says oversight of the nation’s financial system has been strengthened following the economic meltdown of 2008.

Bernanke spoke Monday at a town-hall style meeting with Rhode Island college students.

He said the Federal Reserve will have a greater role in bank supervision in the future to prevent another financial crisis.

Bernanke also fielded questions about student loans, investment strategy and partisan bickering.

College students were selected by their schools to participate. The Association of Independent Colleges and Universities of Rhode Island says most of the students are in business-oriented areas of study.

Bernanke is also scheduled to deliver remarks Monday evening to the Rhode Island Public Expenditure Council, a taxpayer watchdog group.