Federal Reserve Chairman Ben Bernanke addressed the Dallas Regional Chamber yesterday. Bernanke warned of the threats that an aging population and growing debt pose to the United States.
Bernanke on the topic of deficits and government spending: “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“. Republicans are opposed to raising taxes, and democrats are loathe cut cut entitlement programs, the combination of which help to explain why our country has such massive debt problems.
The Fed Chief was sure to emphasize that “sharp near-term reduction in our fiscal deficit is probably neither practical nor advisable“. He said that developing a plan for fiscal stability could lower interest rates and borrowing costs. Lower borrowing costs would help spur economic growth in the housing sector, as mortgage rates would remain low, and would free up financing for businesses and might spur additional hiring.
Bernanke supported new regulatory efforts, advocating an end to “too big to fail” policies saying that “no financial instrument counted as regulatory capital should be allowed to receive any protection from losses”. Lack of regulation in the financial, banking, and investment industries is perceived as one of the potential causes of the economic crisis.
The Chairman addressed the dangers that long term unemployment pose to our economy. Over 40% of those currently unemployed have been out of work for more than six months, a number that is damping growth in most areas of the economy.
Bernanke further remarked that “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“.
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