WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke on Thursday offered an optimistic view on the U.S. economy’s prospects to Democratic senators, but warned that “tough decisions” were ahead on dealing with long-term budget deficits and healthcare costs, according to lawmakers present.
Bernanke, whose term as chairman ends on January 31, told a private lunchtime meeting with senators that the reduction in federal budget deficits and the country’s improving energy position were “all positives” contributing to a healthier U.S. economy, according to Senator Thomas Carper of Delaware.
Carper added that Bernanke said that “the next several years are more encouraging, but we can’t forget those long-term challenges and they involve among other things programs that are concerned with healthcare.”
An aging U.S. population will put increasing pressure on the federal government as it struggles to provide retirement and healthcare benefits to the elderly, poor and disabled.
Bernanke did not speak to reporters upon leaving the meeting and a spokeswoman for the U.S. central bank declined to comment.
The Fed last month decided to begin scaling back its bond-buying monetary stimulus, dropping its monthly purchases to $75 billion from $85 billion. Exiting the stimulus program will likely be the main task on the plate for Fed Vice Chair Janet Yellen, who was confirmed by the Senate on Monday to succeed Bernanke.
Senate Majority Leader Harry Reid, arguing on the Senate floor that an extension of jobless benefits would boost the U.S. economy, quoted Bernanke as saying that the economy could do much better.
“He talked about the vibrancy of this economy now,” said Reid, a Democrat. “He said ... it’s not as good as it should be. But he said: ‘With a little bit of help it would be on fire.’”
Senate Budget Committee head Patty Murray said Bernanke was “very astute, talking about how things are looking up and some of the things we need to be doing investing in infrastructure and research that will help our economy in the future.”
Senator Charles Schumer emerged from the session declaring to reporters that the Fed chief “thinks over the next four or five years the deficit is in very good control but he’s much more worried about middle-class incomes and growth of average families than he is about the deficit.”
President Barack Obama and his fellow Democrats in Congress are focusing their 2014 political message on the need to narrow the income gap between rich and poor.
Schumer, the Senate’s third-ranking Democrat and a senior member of the Senate Banking Committee, said Bernanke also discussed the issue of financial institutions that are deemed “too big to fail.”
Asked how Bernanke addressed that issue, Schumer said: “One of the ways is to have market forces deal with the ability of closing banks when they’re in trouble and he talked about how the credit rating agencies, realizing that the government might not come in and bail out these institutions anymore, have actually lowered their credit ratings, which is a market force.”
Reporting by Richard Cowan and Susan Cornwell; editing by Andrew Hay and Meredith Mazzilli