we can afford that but we can't afford to continue to pay Social Security and Medicare at the current rate...
'the economy faces a budgetary "crisis" that threatens U.S. growth and living standards unless Congress quickly tackles long-term funding shortfalls in Social Security and Medicare,'Bernanke said.
A Democrat, Senator Kent Conrad, is leading this crusade to take Social Security and Medicare out of the "LOCKBOX" where Al Gore wanted to protect it.
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Bernanke: Social Security, Medicare deficits threaten to weaken the economy
Updated 1/18/2007 3:20 PM ET
By Sue Kirchhoff, USA TODAY
WASHINGTON — Federal Reserve Chairman Ben Bernanke said Thursday that the economy faces a budgetary "crisis" that threatens U.S. growth and living standards unless Congress quickly tackles long-term funding shortfalls in Social Security and Medicare.
"If early and meaningful action is not taken, the U.S. economy could be seriously weakened, with future generations bearing much of the cost," Bernanke told the Senate Budget Committee.
"The longer we wait, the more severe, the more draconian" the task becomes, he said. "The right time to start was about 10 years ago."
While Bernanke concentrated on the long-term picture in his Senate testimony (Read the full text), new data Wednesday indicated the near-term economic outlook is brightening. Housing starts perked up in December, while consumer inflation was tame.
Those reports, along with strong data on industrial output and other indicators in recent days, make it more likely the Fed might achieve the "soft landing" it has predicted — that is, slower but steady growth with low inflation.
Federal retirement and health care programs for the elderly will come under enormous strain as the 78 million baby boomers retire, starting next year, life expectancy increases and fertility rates flatten. In 2006, federal spending for Social Security, Medicare and Medicaid equaled about 8.5% of the economy. The non-partisan Congressional Budget Office expects that figure to rise to 10.5% by 2015 and 15% in 2030.
Without changes, the country will run large annual deficits and pile up ever-increasing debt to support the programs, Bernanke said. The ratio of debt to annual economic output could climb to levels not seen since World War II.
"A vicious cycle may develop in which large deficits lead to rapid growth in debt and interest payments" that could spark a "fiscal crisis, which could be addressed only by very sharp spending cuts or tax increases or both," Bernanke said.
The Fed chairman said the U.S. economy alone was unlikely to solve the pending problems. Even a doubling in immigration levels would not be sufficient to make up the funding shortfall, he said.
Fixing the problems, he said, will take persistence and a willingness by Congress and the White House to make difficult choices.
The biggest challenge is reining in the Medicare program, which faces a far greater funding shortfall than Social Security.
Senate Budget Committee Chairman Kent Conrad, D-N.D., suggested Congress take on the challenges and "the sooner we do, the better." ...
http://www.usatoday.com/money/economy/fed/2007-01-18-bernanke_x.htm?csp=34
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