Fed chief warns entitlements for retirees need to be overhauled

October 05, 2006|Associated Press

WASHINGTON -- Federal Reserve chairman Ben Bernanke said yesterday that the burden from retiring baby boomers will strain the nation's budget and economy, unless Social Security and Medicare are revamped.

``Reform of our unsustainable entitlement programs" is a priority, Bernanke told the Economics Club. ``The imperative to undertake reform earlier rather than later is great." Retirement looms for 78 million boomers.

Bernanke did not recommend any specific changes.

President Bush once made his efforts to overhaul Social Security a centerpiece of his second-term agenda. But those efforts sputtered last year due to resistance from Republicans and Democrats.

Bernanke said the United States will have to choose among higher taxes, fewer dollars for other programs, lower spending on entitlement programs, and a sharply higher budget deficit -- or some combination of all those.

Government spending for Social Security and Medicare alone will increase from about 7 percent of the US economy to almost 13 percent by 2030, and to more than 15 percent by 2050, he said. ``The fiscal consequences of these trends are large and unavoidable," he said.