Testifying before the House Budget Committee today, Federal Reserve Chairman Ben Bernanke noted:
Even after economic and financial conditions have returned to normal, however, in the absence of further policy actions, the federal budget appears to be on an unsustainable path. A variety of projections that extrapolate current policies and make plausible assumptions about the future evolution of the economy show a structural budget gap that is both large relative to the size of the economy and increasing over time.
Chairman Bernanke joins a large and growing chorus of voices from both left and right calling attention to the unfortunate truth that even after the recession is over, and the massive deficit spending in response to the downturn has ceased, the country will remain on an unsustainable fiscal course.
Currently, if taxes were held at their historical average, spending on Social Security, Medicare and Medicaid alone would absorb all federal revenue by 2052. Making matters worse, these programs remain on auto-pilot and increase each year without any congressional action. This allows members of Congress to easily avoid making difficult decisions.
Even allowing all of the Bush tax relief to expire and drastically increasing taxes to levels far above the historical average won’t solve this problem. Simply put, the nation is spending more than it can afford. Without significant restrictions on entitlement growth the nation will continue down this dangerous path.
Chairman Bernanke is right, the federal budget is unsustainable. The time to face reality and reform entitlements is now.