A fiscal crisis is only 10 months off if policymakers fail to make headway in setting the nation on a course to long-term financial stability while defusing the impact of automatic spending cuts, Federal Reserve Chairman Ben Bernanke said this week.

Bernanke warned members of the U.S. House during a hearing that America faces a major fiscal crisis in 2013 with tax cuts expected to expire and automatic deficit reduction measures scheduled to take effect.

Bernanke warned policy makers about the economic risks of having both of these events kick in on January 1, 2013. He advised a long-term plan to thwart deep shocks in early 2013 and a move towards a stable fiscal plan is needed to safeguard the tepid recovery.

Bernanke also acknowledged unemployment remains a deep concern. The Fed chair said 40% of the unemployed have been unemployed for six months or more, creating the risk of long-term labor market drop outs.

— Kerri Panchuk