Fed chairman Ben Bernanke closed his Wednesday remarks in Dallas by sounding a warning on the national deficit. "Inevitably," he said, "addressing the fiscal challenges posed by an aging population will require a willingness to make difficult choices." More specifically:
To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above. These choices are difficult, and it always seems easier to put them off--until the day they cannot be put off any more. But unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth.
What's really going on here? Thoughts from some of the top economics and business commentators:
- Not News--But Bernanke's Actually Thinking Global Bernanke just "repeated what many economists and debt ratings agencies have said," 24/7 Wall St.'s Douglas McIntyre explains. He also pulls out a point from the address that few others do: "Bernanke is worried, it seems, not just about American debt, but about whether the world has enough money to absorb it with all the other nations, companies, and consumers needing to borrow at the same time. The pool of capital looks infinite now, but history says that infinity is never more than temporary."
- That Aging Population Problem Mark Thoma at Economist's View looks at how Bernanke talked about the deficit in the context of the aging population and the strain on Social Security and Medicare. He directs the reader to a CBO, report, though, showing that demographics "is not the main problem ... it is health care costs rising independent of the aging population that must be addressed." Meanwhile, delayed retirement may help offset the problem of an aging population with regard to Social Security and Medicare.
- Expect Fiscal Responsibility Message to Spread "Having made his pitch to Congress," writes Jon Hilsenrath for The Wall Street Journal on Wednesday, "Mr. Bernanke is now likely to make it to the public more broadly." The Wednesday speech was a step in that direction.
- 'It's His Low Rates Funding Washington's Enormous Deficit,' argues Business Insider's Joe Weisenthal, a few days before Bernanke's remarks. "Indirectly, of course," he adds.