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Title: Bernanke: ‘Things Will Come Apart’ If Entitlements Are Not Reformed and Spending Controlled
Source:
CNS News
URL Source: http://www.cnsnews.com/news/article/67461
Published: Jun 10, 2010
Author: Matt Cover
Post Date: 2010-06-10 16:37:00 by Badeye
Keywords: None
Views: 4529
Comments: 8
Bernanke: ‘Things Will Come Apart’ If Entitlements Are Not Reformed and Spending Controlled Thursday, June 10, 2010 By Matt Cover, Staff Writer CNSNews.com) – Federal Reserve Chairman Ben Bernanke delivered a frank assessment to Congress on the fate of the economy if entitlement programs are not restructured. On Wednesday, Bernanke warned that “things will come apart” if Congress allows the federal entitlement programs and the deficit spending they cause to continue on their unsustainable path. Speaking at a hearing of the House Budget Committee, Bernanke offered his dire prediction after being asked what would happen if Congress did not take action to head off the impending crisis brought on by unsustainable entitlement spending, led primarily by Medicare. “The entitlement programs are not self-funded,” Bernanke said, “they are unfunded liabilities. They are the single biggest component of spending going forward.” Bernanke said that there were several ways Congress could fix these problems, which amount to approximately $53 trillion in unfunded liabilities, but that eventually Congress must address the issue. “There are various ways you could address this – you can restructure entitlement programs [or] you can cut other things – but at some point you need to address the overall budgetary situation. If you don’t, you’ll get a picture like this one [pointing to a graph showing a steep rise in interest rates and debt] where interest rates are rising and debt outstanding is growing exponentially. “At that point, things will come apart,” he said. “This [rise in debt] will stop, but it might stop in a very unpleasant way in terms of sharp cuts, a financial crisis, high interest rates that stop growth, [or] continued borrowing from abroad.” Bernanke said that some kind of action must be taken within the next few years, because even the levels of debt projected by the Obama administration to occur in the years between now and 2020 were “not sustainable.” “Right now, the various estimates of the CBO and the OMB – under different scenarios – show a structural deficit from, say 2013 to 2020, are between 4 and 7 percent of GDP, which is not sustainable,” he said. “So I would say medium term [when those structural problems should be addressed] is three to five years out in the future and of course the situation gets much more difficult around say 2020 when the entitlement spending becomes even greater.” Bernanke said that while the budget cannot be balanced immediately, lest Congress risk undoing the nation’s budding economic recovery, the government must demonstrate that it has a plan for returning the nation to fiscal sanity. “I think we need to show that within a few years we’re going to go clearly to a path where the debt-to-GDP ratio remains more or less stable, in other words that line in that picture [indicating the debt-to-GDP chart showing unsustainable growth] is flat or going down, rather than rising,” he explained. “As long as that can be persuasively shown to the public and to the markets I think that would be a very important step.” Bernanke also said that the best way for Congress to strengthen the economic recovery would be to stop borrowing and begin to get its fiscal balance sheets in order, saying that it was better policy to extend things like unemployment benefits and aid to states in a fiscally balanced way, rather than through continued borrowing. “Maintaining a strong recovery and keeping interest rates low would be assisted by a commitment by Congress to bring the deficit to a sustainable level and the debt to a relatively flat level [compared] to GDP over the medium term,” he said. “To the extent that you [Congress] decide to undertake short-term spending programs, whether it’s to help the unemployed, provide training, to help state and local governments, or to provide infrastructure, those are the kinds of choices that you’re looking at, to the extent you do that you will be more effective and safer to do that on a twin-track basis where on the other track you’re also thinking about the longer term. That’s my message,” he said
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Begin Trace Mode for Comment # 6.
#1. To: All (#0)
I even have arguments with Conservative friends about 'how'. Bush tried to begin his second term and was crucified. The bottom line however is the numbers, the basic math, doesn't lie. We're going broke. We've constructed giant ponzi schemes that are about to fall like domino's. I don't believe anyone under the age of 65 will ever see a dime from Social Security as its currently configured.
We're going broke. We've constructed giant ponzi schemes that are about to fall like domino's. I don't believe anyone under the age of 65 will ever see a dime from Social Security as its currently configured. Bush wasn't trying to be conservative, ever. He wanted a social security reform plan that would have cost hundreds of billions of dollars to implement. You know, I agree with what you wrote (scary thought). What I continue to argue about is your belief that going back to the folks who caused this mess will somehow fix it.
Honestly, I'd make 25% cuts across the board for at least the first two years, then see where we are. I would exclude SS from that. Instead, I'd means test it. You make over 200K per year AFTER TAXES retired, you don't get the check. Period. I'd rather it be 100K cut off, but man do I get flamed by Conservatives for even suggesting it.
You would cut defense and border patrol by 25%? Seriously?
I would cut defense 25%. I would criminalize the hiring of illegals, tossing the asses of any CEO, CFO, and COO of a company that dared to employ them in prison for at least five full years, no plea bargain, no time off for good behavior. I would also fine the company that did this the amount of the previous years gross sales. I believe if that was done, the wave of illegals would reverse itself within 12 months of the first executives imprisoned. And that would lessen the manpower requirements of the border patrol. Keep in mind I would do this for the first year, maybe two, then reevaluate. I get the feeling you really don't comprehend whats about to happen here if we don't take some drastic fiscal measures.
I believe if that was done, the wave of illegals would reverse itself within 12 months of the first executives imprisoned. And that would lessen the manpower requirements of the border patrol. Keep in mind I would do this for the first year, maybe two, then reevaluate. Nobody, not the tea party, not the Republicans, and not the Democrats support cutting defense spending by 25% a year. Then why is it that only plan the GOP has offered up so far will balance the budget in 70 years? Look, the reality is that much of the current deficit is due to massively declining revenues due to the recession. Even John McCain's economic advisor said that the deficit would be just as large under McCain. CATO says that Obama added less than 10% to the projected deficit. I will tell you again, there's no way anyone is going to attach themselves to massive spending cuts, especially during a recession. Bernanke said today that cutting spending would undercut the recovery. The short term approach has to focus on turning around the economy, we're growing again and adding jobs, but not by nearly enough. And any effort now to cut spending will only cut the legs out from under any recovery. Once you get back to solid growth, you can reform entitlements (SS and Medicare) to reduce the long term debt burden, implement the defense cuts Gates has proposed, and look for ways to reduce discretionary spending (perhaps through salary reductions). I think we both agree that you have to reform Medicare. And, at the end of the day, you have to look at a different tax system. IMHO the biggest thing we could do for short term and long term growth is to replace income-based taxes with a national sales tax. And as far as immigration reform, at the end of the day we have to figure out how to let more people into this country to replace the baby boom generation that's going to die off. History shows us that when populations decline, civilizations decline. BTW, if you want to see how a few relatively small changes to the budget can quickly get the deficit under control, see: http://crfb.org/stabilizethedebt/
#7. To: go65 (#6)
I think we will have to abolish income taxation in favor of consumtion taxation. If we are going to quit electing: like Shrubya, InSane, HELLery and Owe-bama then everybody from the richest to the poorest has to feel the pinch and know exactly where the pinch comes from, BIG JACKASS "PROGRESSIVE" GOVERNMENT.
GO65, the math doesn't support this statement. Flat tax produces massive revenue. And yes, I know nobody has the balls to make the cuts necessary. Kinda nice having a civil discussion btw.
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#2. To: Badeye (#1)
I even have arguments with Conservative friends about 'how'. Bush tried to begin his second term and was crucified. The bottom line however is the numbers, the basic math, doesn't lie.
#3. To: go65 (#2)
You know, I agree with what you wrote
#4. To: Badeye (#3)
(Edited)
Honestly, I'd make 25% cuts across the board for at least the first two years, then see where we are.
#5. To: go65 (#4)
(Edited)
#6. To: Badeye (#5)
I would cut defense 25%. I would criminalize the hiring of illegals, tossing the asses of any CEO, CFO, and COO of a company that dared to employ them in prison for at least five full years, no plea bargain, no time off for good behavior. I would also fine the company that did this the amount of the previous years gross sales.
I get the feeling you really don't comprehend whats about to happen here if we don't take some drastic fiscal measures.
Replies to Comment # 6. 
JACKASSES
#8. To: go65 (#6)
Look, the reality is that much of the current deficit is due to massively declining revenues due to the recession.
End Trace Mode for Comment # 6.
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