But Bernanke, the nation’s most prominent economist, warned that the government had emerged as perhaps the greatest threat to renewed growth.
“The quality of economic policy making in the United States will heavily influence the nation’s long-term prospects,’’ Bernanke said in the much-anticipated speech at a policy conference held each August at a resort in Grand Teton National Park.
The turn toward stronger language was welcomed by some observers of partisan battles in Washington that have pitted Republicans demanding spending cuts to reduce the federal debt against Democrats arguing for cuts and increased revenue.
A deal reached this month to raise the maximum amount the government can borrow, in exchange for spending cuts of at least $2.1 trillion, would not reduce the debt to a level most economists regard as sustainable. The political brinksmanship led Standard & Poor’s to remove long-term Treasury securities from its list of risk-free investments.
Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, described Bernanke’s remarks as “an emergency intervention.
“It was great to hear him weigh in so strongly,’’ MacGuineas said. “He’s saying what needs to be said, and hopefully people will listen because of the messenger.’’
Indexes fell sharply as the speech was released at 10 a.m. and it became clear that Bernanke was not promising additional support of the economy. The Dow Jones industrial average was down about 78 points shortly before the speech started and slumped as many as 220 points shortly after Bernanke started speaking. It recovered within an hour and stayed higher the rest of the day.
The Dow Jones industrial average rose 134.72 points, or 1.2 percent, to close at 11,284.54. It was up 4.3 percent for the week after being down the past four.
