Federal Reserve Chairman Ben Bernanke testifies at a Senate Budget Committee hearing. (Shirley Li/Medill)

WASHINGTON –Federal Reserve Chairman Ben Bernanke called the U.S. economic outlook “uncertain” Tuesday and urged “close monitoring” of the economy.

At a hearing before the Senate Budget Committee, Bernanke noted the recovery of manufacturing in the country, but said he was concerned about  the federal deficit and emphasized the need for greater urgency in dealing with it over the long term.

“The U.S. federal deficit will become unsustainable within 15 to 20 years at the most,” he said. “We need some major changes…We need a long-term plan to put our debt to GDP ratio, our overall fiscal burden, on a sustainable path.”

A long-term deficit reduction plan, Bernanke said, must be balanced with short-term needs of the country, such as stabilizing the housing market. While the market has improved since the crisis in 2006, Bernanke said prices and demand for new construction are limited by uncertain job prospects.

In addition, despite last week’s Bureau of Labor Statistics jobs report of a drop in unemployment to 8.3 percent, Bernanke said the pace of economic recovery is still “frustratingly slow,” which could lead to more trouble in the future.

“The sluggish expansion has left the economy vulnerable to shocks,” Bernanke said.

He predicted “somewhat stronger growth this year than in 2011,” he said.

But he cited a Congressional Budget Office analysis that had growth slowing to about 1.1 percent by January 2013.

At that time, the Bush tax cuts are set to expire, and the Budget Control Act, which reduces spending, will take effect. Therefore, “there will be a very sharp change in the fiscal stance of the federal government,” Bernanke said. “Without compensating action, it would indeed slow the recovery.”

Bernanke also dealt with concerns from the committee, as members said they feared the Fed would prioritize job growth over inflation. Sen. Chuck Grassley, R-Iowa, noted that the Federal Open Market Committee had a target of keeping inflation at about 2 percent every year.

“It seems to me that you care more about unemployment than about inflation,” Grassley said. In response, Bernanke assured the committee members that the FOMC will “take a balanced approach in its efforts to return both inflation and employment to their desired levels.”

Regarding the Fed’s decision to keep interest rates near zero until at least late 2014, Bernanke was firm, asserting that the Fed will stick to the three-year plan in its effort to boost economic growth.

The senators pushed him to endorse their respective party’s budget proposals, but Bernanke claimed he was “a little bit leery of taking positions”; instead, he emphasized working together to make productive investments.

“There’s a lack of clarity among the general public,” Bernanke said, responding to New Hampshire Republican Sen. Kelly Ayotte’s question about what keeps him up at night. “Everyone wants a lower deficit but no one wants to lose their own program. … We would all benefit from action to credibly and strongly articulate a plan over the next couple of decades.”