WASHINGTON — Federal Reserve Chairman Ben Bernanke yesterday urged Congress and the administration to cut record-high budget deficits, warning that they could erode investor confidence and endanger the economy's long-term health.

Bernanke's comments came as concerns grow at home and overseas about the United States' mounting red ink.

"Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke told the House Budget Committee.

GM, CHRYSLER JUSTIFY DEALERSHIP CLOSURES

WASHINGTON — The chiefs of General Motors and Chrysler told skeptical lawmakers yesterday they have too many dealers to support their slimmed down operations and sacrifices must be shared as they fight to overcome bankruptcy and survive. They acknowledged that slashing dealerships is causing pain in communities around the country.

Committee Chairman Jay Rockefeller, D-W.Va., suggested both companies were abandoning customers and dealers, some of whose families have been in the business for decades.

More than 2,700 dealerships are in line to lose their franchise. Two small-town dealers invited to appear before the committee spoke of the anguish ahead.

REPORTS SIGNAL SLOW ECONOMIC RECOVERY

WASHINGTON — A pair of economic reports released yesterday indicated only slight improvement in the service and manufacturing sectors, suggesting that any economic recovery will be gradual.

The nation's service sector shrank in May at the slowest pace since late last year.

And factory orders rose in April. But the improvements fell short of economists' expectations.

Reports earlier this week on home sales and manufacturing had been encouraging, but yesterday's figures sent a reminder that the economy remains sluggish.

"People assumed it was safe to go back outdoors, but it's still raining," said David Wyss, chief economist at Standard & Poor's.