Federal Reserve Chairman Ben Bernanke told lawmakers this week that the government’s borrowing was at “clearly unsustainable” levels, warning that its wild budget deficits increase the possibility of a sudden fiscal crisis which is creeping “ever closer.” The central bank chief also said Washington’s exploding debts would crowd out private-sector investment with damaging consequences for the economy.

Bernanke, who has been widely criticized in recent years for manipulating markets and handing out trillions of dollars to big banks around the world, urged Congress to address its fiscal problems "as soon as possible." And if something is not done to correct the situation, he warned, it will have serious negative repercussions ranging from a potential fiscal crisis to reduced productivity and growth.
 
“Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis,” Bernanke explained. If investors lose confidence in the government’s ability to manage its finances, interest rates could soar, he added, pointing to the situation seen in a number of other countries recently.
 
Congress, of course, has been running deficits amounting to well over $1 trillion in recent years. To put that in perspective, the entire GDP of the United States is around $15 trillion. And according to projections by the non-partisan Congressional Budget Office (CBO), that enormous figure is expected to balloon in the coming years unless lawmakers take action.

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Photo: Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, Feb. 7, 2012, before the Senate Budget Committee: AP Images