Ryan rains on Bernanke’s parade

Although Federal Reserve Board Chairman Ben Bernanke came to a Congressional committee with mostly a positive report about the direction of the American economy this week, he was greeted in the opening remarks by a dour warning from U.S. Rep. Paul Ryan (R-Janesville)
"The recovery in economic activity that began in the second half of last year has continued at a moderate pace so far this year … The incoming data suggest that gains in private final demand will sustain the recovery in economic activity," Bernanke said in remarks prepared for the House Budget Committee. "The economy … appears to be on track to continue to expand through this year and next.”
Bernanke said that the federal budget deficit should narrow over the next few years but that more fiscal steps are necessary to put the federal budget on a sustainable path.
"Unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy economic growth," Bernanke said.
Bernanke said consumer spending will continue to increase at a moderate pace, as should business investments.
“Looking forward, investment in new equipment and software is expected to be supported by healthy corporate balance sheets, relatively low costs of financing of new projects, increased confidence in the durability of the recovery, and the need of many businesses to replace aging equipment and expand capacity as sales prospects brighten. More generally, U.S. manufacturing output, which has benefited from strong export demand, rose at an annual rate of 9 percent over the first four months of the year,” Bernanke said.
Ryan saw things differently.
“Over the past few months, we’ve watched as the sovereign debt crisis in Europe has boiled up to threaten that Continent’s economic recovery and even global financial stability in general. In some ways, we are seeing a replay of a similar dynamic which impaired global financial markets in 2008.  The fear then was systemic exposure to bad mortgage-related assets, but the fear now is driven by exposure to sovereign credit and the possibility of a debt-induced economic slump,” Ryan said.
“But Americans are left to wonder: Could we one day find ourselves at the epicenter of such a crisis?  Could a European-style debt crisis one day happen right here in the U.S.? 
The answer is undoubtedly ‘yes.’  And the sad truth is that inaction by policymakers to change our fiscal course is hastening this day of reckoning,” Ryan said. “A brief look at the budget numbers shows that our current fiscal situation – and its trajectory going forward – is very dire. The budget deficit this year stands at $1.5 trillion, or just over 10 percent of GDP.  Under the president’s budget, the CBO tells us that the level of U.S. debt will triple by the end of the decade, meaning that in a few short years, the U.S. is poised to join that group of troubled countries whose public debt absorbs a large and growing share of their economic output. A fiscal crisis here in the U.S. is no longer an economic hypothetical, but a clear-and-present risk to our economy, to society’s most vulnerable citizens, and to America’s standing in the world.”
– BizTimes Milwaukee