The Calm Before the Storm
January 19th 04:15:32 PM
Yesterday Federal Reserve Chairman Ben Bernanke testified in front of the Senate Budget Committee on the United States' current fiscal positions and their long- and short-term effects on our economy. He cited entitlement payments, such as Social Security and Medicare, as the biggest threats to the future growth of our economy. Bernanke stressed that these threats must be dealt with as soon as possible, and cautioned that while the economic outlook is relatively steady now, this is just the calm before the storm. He concludes:
Because of demographic changes and rising medical costs, federal expenditures for entitlement programs are projected to rise sharply over the next few decades. Dealing with the resulting fiscal strains will pose difficult choices for the Congress, the Administration, and the American people. However, if early and meaningful action is not taken, the U.S. economy could be seriously weakened, with future generations bearing much of the cost. The decisions the Congress will face will not be easy or simple, but the benefits of placing the budget on a path that is both sustainable and meets the nation's long-run needs would be substantial.
Read Chairman Bernake's full testimony here.
Posted by Natalie Vernon
Comments
Early in Ronald Regan’s Presidency he addressed the American people, saying; “I can think of no more important domestic problem requiring resolution than restoring the integrity of Social Security”. He earned the trust of the American people, and enjoyed unanimous support for his 1983 Social Security reform package. The comprehensive plan would make SS solvent for the next 75 years by gradually increasing SS tax contributions, and the retirement age. New trust fund surpluses would be used for future financial obligations, created by retiring baby boomers. Americans trusted their President, and continue to honor their part of the deal, generating 12.4 cents for every gross dollar earned up to a maximum of $97,500, and are waiting an additional 10 months for full retirement. Billions of excess dollars flowed into the trust fund, however, like most political fixes, this fix had a built in gotcha. The gotcha mandates exchanging excess trust fund dollars for IOUs, resulting in contributions being spent for something other than intended, a direct violation of the trust American’s put in President Regan. The IOU for dollar swap effectively turns paid contributions into future obligations against workers and their families. These instruments of financial pain now total over 2 trillion dollars, and are increasing at the rate of $200 plus billion annually. Recently President Bush said; “There is no Social Security trust fund, just IOUs that I saw first hand, that future generations will pay”. He should know, as this President and his administration have spent more trust fund excess cash than all previous administrations combined. Our “trust dollars” helped to fund huge tax breaks for the richest 1%, and an ill-advised incursion into a foreign country, to name a couple. Not to be outdone, the “I’m entitled”, selfish seniors clamor for more, more Medicare, more senior discounts, and bigger COLAs. Our trust has been violated and must have consequences. Replacing Grandpa’s check with an IOU seems to be an appropriate consequence, since history suggests he approves of this procedure. So Grandpa, have a ball and don’t worry - there’s plenty more IOUs were that one came from
Posted by Jim G on January 20th 05:03:21 PM
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