Fed Chair Ben Bernanke, whose apostasy once knew no bounds, has finally found religion. He’s joined the Church of Our Lady of the Deficit. After a couple of years of deficits climbing through the roof during which we heard not a peep from him about their effect on our financial future, Mr Bernanke is suddenly concerned. Very concerned.
Federal Reserve Chairman Ben S. Bernanke warned Congress yesterday of a “fiscal crisis” if it doesn’t curb the projected growth of federal spending on retirement and health-care programs.Echoing similar warnings by his predecessor, Alan Greenspan, Bernanke told the Senate Budget Committee that “the effects on the U.S. economy would be severe” if the government’s debt were allowed to balloon as forecast.
Hmmm. Why this sudden switch?
Bernanke noted that the federal deficit has declined –
Whoa, old horse. Declined? Declined??? Whose numbers is he looking at, France’s?
– in the past two years but said that was “the calm before the storm” of skyrocketing expenses for an aging population. He cited Congressional Budget Office projections that spending on the big entitlement programs — Social Security, Medicare and Medicaid — will equal 15 percent of the nation’s gross domestic product by 2030, double last year’s level. (emphasis added)
Mr Bernanke is patently NOT concerned about the enormous amount of money being spent in Iraq (an estimated $$$1.2 Trillion$$$), and the even more enormous amounts about to be spent if the Congress doesn’t call a halt to Bush’s new “plan”. That gigantic pool of $$$$ isn’t a strain on the budget even though we’re borrowing it. In fact, it apparently isn’t even included in his definition of “deficit” since he doesn’t mention it.
No, what exercises Mr Bernanke’s worry cells is the possibility that social programs like Soc Sec and Medicare might cause a “fiscal crisis”. Odd that he had nothing to say about this as long as the Republicans were in power and only converted to the CoOLotD after the Democrats took over. One would almost think this was a strictly political gambit, wouldn’t one?
But no. After naming the spending he thinks will break the budget, he went on to assure the Senators that he was “non-partisan” and wouldn’t make any “specific recommendations on taxes or spending”.
Uh-huh. That’s a good one. “You’re spending too much on entitlements but I’m not going to mention that you’re spending too much on entitlements because I’m non-partisan.”
Mr Bernanke’s concern is apparently contagious, as the NYT reports that Treasury Sec Paulsen is on the very same bandwagon at the very same time.
[Bernanke’s] comments also dovetailed with statements by the Treasury secretary, Henry M. Paulson Jr., favoring efforts to curb the cost of entitlements this year, despite skepticism among some lawmakers that painful steps to deal with the problem cannot be taken two years before a presidential election.Mr. Paulson has begun discussions with leading Democrats in Congress on Social Security and budget matters, but the administration has not shown its hand with specific proposals. President Bush’s earlier proposal to convert a portion of Social Security benefits for some future retirees into individual investment accounts failed to even reach a vote in Congress.
No specific proposals, eh? Can’t imagine why not.
This is obviously the Bush Administration on a flanking maneuver to try to undercut Social Security and Medicare using the deficit as an excuse. Bernanke, after all, was Bush’s top economic advisor during the attempts to privatize SocSec and gut Medicare, so this is nothing new for him, really. I trust the Democrats will see through this ploy. One has apparently not only seen through it, he’s turned it around and used it against the Admin by linking it to Bush’s beloved tax cuts.
Mr. Bernanke’s tone of urgency echoed the comments of Senator Kent Conrad, a North Dakota Democrat who has long criticized the Bush administration’s tax cuts and warned of the risk of long-term federal deficits. Only now, Mr. Conrad was leading the hearing and welcoming Mr. Bernanke’s warnings.
If the Conrad Counter-Ploy works, the Bush Admin could find its tactic backfiring right into the upcoming fight over rescinding those cuts.
That would be what I’d call poetic justice.