Bernanke warns about rising US deficit

US Federal Reserve chairman Ben Bernanke yesterday urged the administration to come up with a plan to cut the budget deficit and look to modifying the tax system. He said that rising deficit would do ''great damage'' to the US economy in the long run.

''Our nation's fiscal position has deteriorated appreciably since the onset of the recession and the financial crisis,'' Bernanke said at the first meeting of the newly created National Commission on Fiscal Responsibility and Reform.

The Fed chief stressed that an economy is stronger when taxes are not too high and are collected in an efficient, equitable and transparent way.

''At present, a broad consensus exists that the US tax code does not satisfy these criteria and is in need of reform,'' Bernanke told the commission, which was established by US President Barack Obama in February to give recommendations on ways of balancing the federal budget.

Bernanke said that the White House and Congress should come up with a credible plan to reduce the nation's deficit, which hit a record $1.4 trillion last year.

According to Obama's budget proposal to the Congress, the US federal budget imbalance in fiscal year 2010 that ends on 30 September will hit another historic high level of $1.56 trillion.