Federal Reserve Chairman Ben Bernanke said on Tuesday that the looming fiscal cliff and battle over raising the U.S. debt ceiling could have “severe” consequences for the U.S. economy if not resolved.
Bernanke told the New York Economic Club on Tuesday that while “coming together to find fiscal solutions will not be easy,” long-term solutions are needed because the “stakes are high.”
"Preventing a sudden and severe contraction in fiscal policy early next year will support the transition of the economy back to full employment,” Bernanke said, according to The Hill. “A stronger economy will in turn reduce the deficit and contribute to achieving long-term fiscal sustainability.”
Recalling the threat of default in the summer of 2011 as members of Congress debated about whether to raise the debt ceiling, Bernanke said “a failure to reach a timely agreement this time around could impose even heavier economic and financial costs."
According to the U.S. Treasury Department, the country is on pace to hit the debt ceiling at the beginning of 2013.