WASHINGTON (AP) - Federal Reserve Chairman Ben Bernanke on Tuesday urged Republicans to support raising the nation's borrowing limit. He said threatening to block the increase to gain deeper federal spending cuts could backfire and worsen the economy.
Even a short delay in making payments on the nation's debt would cause severe disruptions in financial markets, damage the dollar and raise serious doubts about the nation's creditworthiness, Bernanke said.
It wasn't Bernanke's first warning to Republicans, who are vowing to block an increase that doesn't include a deal to slash government spending by the same amount. But it was his most explicit in terms of the consequences.
The nation reached its $14.3 trillion borrowing limit in May. Treasury Secretary Timothy Geithner has said that the U.S. could default on its debt if it doesn't raise the limit by Aug. 2.
"I fully understand the desire to use the debt limit deadline to force some necessary and difficult fiscal policy adjustments, but the debt limit is the wrong tool for that important job," Bernanke said in a speech to a conference sponsored by the Committee for a Responsible Federal Budget.