NY's top banker advises to consume less, invest more

To spur long-term economic growth, the United States must consume less, reduce government deficits and invest more, New York's top banker said Tuesday night.

William Dudley, president of the Federal Reserve Bank of New York, called on policymakers in the public and private sector to help reorient the U.S. economy toward exports, technological advances and worker training. He said politicians and consumers must open their wallets less often.

The recession "did not cause the old growth patterns to become unsustainable," Dudley told a dinner meeting of the Foreign Policy Association in Manhattan. "They already were. But its aftermath forces us to confront the need for adjustment with greater urgency."

He said the "composition of economic activity . . . needs to be rebalanced" by reducing consumer consumption and government debt. He said businesses should upgrade their operations to become more efficient and produce new goods and services.

Dudley also doubted that home construction would pick up in the near future due to the lingering foreclosure crisis.

"We must recognize that the rest of the world is closely monitoring our ability as a nation to come to grips with our long-term fiscal challenges, and to pay our debts when they come due," he said. "This is an important litmus test of our credibility as a nation and our ability to exercise global economic leadership."

Dudley, who is vice chairman of the Fed's interest-rate setting Open Market Committee, expressed frustration at the slow U.S. recovery from recession, calling it "distinctly subpar." Given the federal deficit, however, he doubted Washington could provide further stimulus for business activity.

Some of his remarks echoed those of Federal Reserve Board Chairman Ben Bernanke to bankers in Atlanta earlier Tuesday.

While acknowledging recent reports that suggest another slowdown is in the offing, particularly May's anemic jobs report, Bernanke dismissed some economists' predictions of a double-dip recession. The 18-month recession ended in June 2009, according to the National Bureau of Economic Research.

"I expect hiring to pick up from last month's pace as [economic] growth strengthens in the second half of the year," Bernanke said. He blamed sluggish business activity on a spike in gasoline prices and the Japanese earthquake and tsunami.

However, Bernanke warned against the deep cuts in federal spending.