Posted on 10/04/2006 10:47:36 AM PDT by SDGOP
Unless Social Security and Medicare are revamped, the massive burden from retiring baby boomers will place major strains on the nation's budget and the economy, Federal Reserve Chairman Ben Bernanke said Wednesday.
"Reform of our unsustainable entitlement programs" should be a priority, he said in prepared remarks to the Economics Club of Washington. "The imperative to undertake reform earlier rather than later is great," Bernanke added.
It marked the Fed chief's most extensive comments to date on the challenges facing the United States with the looming retirement of 78 million baby boomers.
In his remarks, Bernanke did not offer Congress and the Bush administration recommendations on how the massive entitlement programs should be changed. Efforts by the administration to overhaul the Social Security program _ once a centerpiece of President Bush's second-term agenda _ sputtered last year, meeting resistance from Republicans and Democrats alike.
As the population ages, the nation will have to choose among higher taxes, less non-entitlement spending by the government, a reduction in spending on entitlement programs, a sharply higher budget deficit or some combination thereof, Bernanke said.
Government spending on Social Security and Medicare alone will increase from about 7 percent of the total size of the U.S. economy to almost 13 percent by 2030 and to more than 15 percent by 2050, he said.
Bernanke declared: "The fiscal consequences of these trends are large and unavoidable."
The government recorded a budget deficit of $319 billion last year. This year's red ink is projected by the White House to total around $296 billion.
Financially shoring up Social Security and Medicare will involve difficult choices by lawmakers and other policymakers, Bernanke said.
For instance, if the government tried to finance projected entitlement spending entirely by revenue increases, the taxes collected by the federal government would have to rise from about 18 percent of the total size of the economy to about 24 percent in 2030, he said.
In his speech, Bernanke did not discuss the future course of interest rates.
The Federal Reserve meets next on Oct. 24-25, and many economists believe the policymakers will leave rates unchanged for the third meeting in a row.
With the economy slowing, the central bank in early August decided to halt _ for the first time _ a two-year long campaign to boost interest rates to fend off inflation. Policymakers suggested that the cooling economy would eventually lessen inflation pressures.
There's been relief on the inflation front as once-surging energy prices have settled down. Gasoline prices, which had topped $3 a gallon in the summer, have slid and are now averaging $2.31 a gallon nationwide, the Energy Department says.
Like you mean when we were your age and complained about paying our FICA taxes so your grandparents didn't lose their homes or starve?
Oh, that's right. We never did that. We may have not liked it, but we didn't whine about it. We had too much respect for the generation that raised us to do that.
Seems to me that you're the whiner here. Try to be a little more civil, please.
Yes, people like my parents who saved up for their retirement and people like you i suspect. SOme of their friends on the other hand have just started saving now and are massively screwed.
Your forgetting that back then it was almost 20:1 supporting social security, now it's 3 to 1. FICA taxes are super high and will get much higher. I think we've got a much bigger reason to complain than you do.
Some figures have it as 1:1 or 1:3 depending on who does the numbers. Remember, a lot of illegals pay no SS.
LOL, cut the drama, I'm to OLD for lectures.
who didn't plan for retirement ? my retirement plan is exactly what you said...and I planned it.
Unfortunately, when the baby boomers hit voting age around LBJ's time, they started to expand and vote in more programs time and time again.
Their parents started it, however, and raised the boomers with the socialist ideas.
Hopefully the boomers will figure a way out. For the children...seriously.
Well, I'm one of the three to one, not one of the 20 to one, because I'm still working and paying taxes.
But complaining isn't the answer. What do you suggest? Really.
When the SS bill was originated, any street hustler could have told you it was a Ponzi scheme. And I've paid lots of money into it. I don't want to get screwed either.
Personally, I think phased privatization might be a practical approach. Any thoughts?
I have no desire to rely on the government for my lifestyle, but what happens when lazy people demand benefits and my taxes skyrocket?
Really? You sound like a snotty little "it's all about me" kid.
Just drop the "Whiney baby boomer" rhetoric, and you won't get flamed for it.
Boomers, in fact, have had to plan twice over, since we pay for social security and have increasingly to fund our own retirement through 401Ks; the pensions are not there for us which existed for our parents.
I'm sorry, but wasn't it your generation that coined the term "don't trust anyone over 30"? I think boomers who weren't military or boomer women who didn't have kids, should have the benefits drastically cut.
Hey Pop - get in this box and eat this cyanide pie. That's good boy!
Boomer Bob
All this crap about the baby boomers retiring and their being a large brain drain in the US is a load. I don't see any of them retiring. My dad is 74 and still happily working.
Phasing is a good idea. I think the ultimate goal would be to shift social security to the point where it is a, well for lack of a better term, forced savings mechanism and make sure its in a lockbox. I.e. if i put say 250k in over my lifetime, when i retire that 250k is sitting in a bank account for me and me alone. If i save 500k, 500k is waiting for me.
This way people who won't normally save will have something waiting for them when they retire, and should they die, they can pass their benefits onto their children.
Clearly it needs to be phased in.
Medicare is the other problem. First off we need to get rid of that boondoggle drug entitlement. Second we need to progressively index it, i don't like the idea, but it's the only really feasable way. I.e. , we don't need to be picking up bill gates tab, but at the same time the ones who are genuinely poor i guess we have no choice. Also make people pay premiums that are high deductible based. By forcing a higher deductible, it prevents these seniors from wandering to the doctors office everyday, and makes them only go when they genuinely need it.
Studies have shown that a higher deductible plan can help drive down the cost of medicine because since the consumer is paying directly for medical care, he will look around for the best deal. Market place takes care of the rest.
What about boomer men who didn't have kids?
74 also isn't a boomer, by a long shot.
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