In testimony before the House Budget Committee on Thursday, Federal Reserve Chairman Ben Bernanke warned that current spending levels were "clearly unsustainable" and argued that reducing the deficit "should be a top priority."
According to Politico, he said that if congress and the administration fail to act the exploding federal debt could bring about a fiscal catastrophe.
"Although we have been warned about such developments for many years, the time when projections become reality is coming closer," Bernanke told the House Budget Committee. "To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable."
The worst case scenario—"which ultimately will happen" without changes—in that borrowing costs would skyrocket as investors lose confidence, mirroring the kinds of panic currently being seen in European countries like Greece, Bernanke said.
Bernanke’s comments come days after the Congressional Budget Office presented a grim economic forecast for the coming years, stressing the need to bring deficits under control.
In his January 24 State of the Union Address, President Obama suggested an approach to deficit-reduction centered on the so-called "Buffett Rule," which would impose a mandatory minimum tax on families earning more than $1 million annually. It is estimated that a bill recently introduced by Sen. Sheldon Whitehouse (D.-R.I.) to enforce the "Buffet Rule" would increase federal revenues by $50 billion per year.
The CBO estimates a federal deficit of more than 20 times that amount ($1.1 trillion) in 2012.