“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them”.
-Ogden Nash
Federal Reserve Chairman Ben Bernanke testified today before President Obama’s commission tasked with dealing with the federal deficit. He did not mince words when he said that failure to pay down the huge federal deficit would cause “great damage” to the U.S. economy. Bernanke said that current government spending is on “an unsustainable path”.
The Fed Chairman advocated the committee to develop a plan to pay down the federal deficit, which hit a record amount of $1.4 trillion last year. Large portions of the debt are a result of recent economic bailout efforts and the cost of fighting multiple wars.
Bernanke further cautioned that allowing the deficit to continue to grow could drive borrowing rates higher. At some point investors will demand higher returns to finance government debt. This will cause interest rates to increase, and mortgage rates will be higher as a result.
The sustainability of current debt spending could cause ratings agencies to potentially downgrade the credit rating of the United States. In February, Moody’s said that the deficit will “at some point put pressure on the AAA-government bond rating”. While a credit downgrade is not an immediate concern, the “distance-to-downgrade has substantially diminished”.
Bernanke added, “The path forward contains many difficult trade-offs and choices, but postponing those choices and failing to put the nation’s finances on a sustainable long-run trajectory would ultimately do great damage to our economy”. As if to stress this point, Bernanke said the country will not “grow our way out of this problem” and “significant changes to our fiscal policies” will be needed in order to reduce our debts.
President Obama has tasked the committee with developing a plan to cut the deficit to less than $550 billion by 2015.
What is your take on plans to deal with the debt? Share your opinion in the comments section below.
Loading ...
Andy
April 27, 2010 @ 4:07 pm
Stop giving credits, bailouts and other government money to people without asking them to grab a shovel and fill a pothole.
Free money from the government. BAD idea.
Reply
Boomer56
April 29, 2010 @ 10:55 am
Seems simple enough…a metaphor…we are all in a life boat together (our country). And the boat is taking on water (spending more that we make = huge deficits). Either we all bail out the water (take cuts on our favorite government spending programs) or we have to start throwing people over the side (this is the classic guns vs. butter argument). Easier for everyone to bail rather than feed someone to the sharks.
So, take the deficit, divide by the budget, and you get a percent number. Then tell EVERYONE in the Federal government, from A-Z, that they are getting X% less this year. Then they have to start to actually MANAGE like the rest of us, people who run companies, people who manage their personal budgets, people who manage small businesses. NO ONE is exempt, no one is spared. Cut money from the bail outs, cut money from welfare, farm price supports, Medicare, carrier battle groups, war on terror, war on drugs, war on government stupidity
etc. NO ONE is spared. Then, we all share the pain, and learn to live with less. Cause that’s what we have…less
Reply
joe28 Reply:
September 28th, 2010 at 2:10 am
1st i’d like to add that it’s the whole world in this boat.
2nd…it’s the rich…we cut taxes on their word that it was better for the economy. they failed and wanted a bailout. we socialized the cost but privatized the profits. i didn’t vote for socialism because i’m lazy or want someone pay my bills…i voted for it because i paid their bills and I want my money back.
Reply