By Erik Wasson - 06/14/11 07:04 PM EDT
Federal Reserve Chairman Ben Bernanke warned Tuesday against brinksmanship in the current deficit talks between the administration and Congress.
“I fully understand the desire to use the debt limit deadline to force some necessary and difficult fiscal policy adjustments, but the debt limit is the wrong tool for that important job,” he said.
Bernanke shot down suggestions by Sen. Pat Toomey (R-Pa.) that the Department of Treasury could prioritize U.S. debt payments once the ceiling is reached to protect bondholders. He said delays in other government payments could still spook investors and hurt the economy.
As under the Hippocratic Oath taken by doctors, lawmakers should first vow to do no harm, he said.
“I am by no means recommending delay or inaction,” Bernanke said.
A deficit deal could include a down payment on deficit reduction along with an enforceable timetable for further decisions. It could also include triggers to establish credibility, Bernanke said.
“History makes clear that failure to put our fiscal house in order will erode the vitality of our economy, reduce the standard of living in the United States and increase the risk of economic and financial instability,” he said.
House Budget Committee Chairman Paul Ryan (R-Wis.) said the debt ceiling is the "only train leaving the station" where something can get done because the Senate has failed to produce a budget this year.