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Bernanke gives upbeat assessment of economy to U.S. senators

Thursday, 9 Jan 2014 | 3:40 PM ET

WASHINGTON, Jan 9 (Reuters) - Federal Reserve Chairman Ben Bernanke on Thursday offered an optimistic view on the U.S. economy's prospects to Democratic senators, but warned that "tough decisions" were ahead on dealing with long-term budget deficits and healthcare costs, according to lawmakers present.

Bernanke, whose term as chairman ends on Jan. 31, told a private lunchtime meeting with senators that the reduction in federal budget deficits and the country's improving energy position were "all positives" contributing to a healthier U.S. economy, according to Senator Thomas Carper of Delaware.

Carper added that Bernanke said that "the next several years are more encouraging but we can't forget those long-term challenges and they involve among other things programs that are concerned with healthcare."

An aging U.S. population will put increasing pressure on the federal government as it struggles to provide retirement and healthcare benefits to the elderly, poor and disabled.

Bernanke did not speak to reporters upon leaving the meeting. Fed Vice Chair Janet Yellen was confirmed by the Senate on Monday to succeed Bernanke at the helm of the central bank.

Senate Budget Committee head Patty Murray said Bernanke was "very astute, talking about how things are looking up and some of the things we need to be doing investing in infrastructure and research that will help our economy in the future."

Senator Charles Schumer emerged from the session declaring to reporters that the Fed chief "thinks over the next four or five years the deficit is in very good control but he's much more worried about middle-class incomes and growth of average families than he is about the deficit."

President Barack Obama and his fellow Democrats in Congress are focusing their 2014 political message on the need to narrow the income gap between rich and poor.

Schumer, the Senate's third-ranking Democrat and a senior member of the Senate Banking Committee, said Bernanke also discussed the issue of financial institutions that are deemed "too big to fail."

Asked how Bernanke addressed that issue, Schumer said: "One of the ways is to have market forces deal with the ability of closing banks when they're in trouble and he talked about how the credit rating agencies, realizing that the government might not come in and bail out these institutions anymore, have actually lowered their credit ratings, which is a market force."