Even though sizable deficits right now are "unavoidable" given the damage wrought by the recession, the persistence of red ink raises risks to the country's long-term economic health, he said.
A credible plan to pare the deficit could provide the economy with benefits in the near term, including lower longer-term interest rates and increased consumer and business confidence, Bernanke told lawmakers.
"Addressing the country's fiscal problems will require difficult choices, but postponing them will only make them more difficult," he warned.
On the economy, Bernanke seemed slightly more optimistic that the fledgling recovery will keep on going after massive government stimulus fades later this year. Incoming economic barometers suggest that growth in demand by consumers and businesses "will be sufficient to promote a moderate economic recovery in coming quarters," he said.
Consumers are spending again after having cut back sharply during the recession. Going forward, consumer spending should be helped by a gradual pick up in jobs, a slow recovery in household wealth from recent lows and some improvement in the ability to get loans, Bernanke said.
That assessment of consumers -- whose spending accounts for 70 percent of national economic activity -- also appeared more upbeat. In recent weeks, Bernanke and other Fed officials have cited a litany of headwinds facing consumers, including high unemployment, rising home foreclosures and sluggish wage growth.
Businesses, meanwhile, have boosted spending on equipment and software at a solid pace and factories are benefiting from stronger demand for U.S. exports, he noted. Improved financial conditions are also helping out the economy.
However, problems still remain.
Bernanke said weakness in the housing and commercial real-estate sectors is putting "significant restraints" on the pace of the economic recovery. And, the poor fiscal conditions of many state and local governments have led to continuing cutbacks in workers, another force that will hold back the recovery, he said.
On the jobs front, Bernanke was encouraged by the 162,000 jobs added in March, the most in three years. However, the moderate pace of the economic recovery means that the 8 million-plus jobs lost by the recession won't quickly return. Bernanke said it will take a "significant amount of time" to restore those positions. He didn't say how long.
The unemployment rate has been stuck at 9.7 percent for three straight months, close to its highest levels since the early 1980s.
Bernanke said he is especially concerned about that 44 percent of the unemployed in March had been without a job for six months or more. "Long periods without work erode individual's skills and hurt future employment prospects," he said. Younger workers may be particularly hurt if the weak labor market prevents them from finding a first job or from gaining important work experience, Bernanke said.
Inflation is under control, despite a steep run-up in energy prices, he noted.
The Fed chief didn't talk about the future course of interest rates.
The Fed has held rates at a record low since December 2008 to aid the economy.
At some point when the recovery is firmly entrenched, the Fed will need to start boosting rates to prevent any inflation problems.
The soonest the Federal Reserve will begin raising short-term interest rates is the fourth quarter, according to 34 of the 44 economists polled in a new AP Economy Survey that debuted on Monday.
