By Mark Huffman
ConsumerAffairs.com
January 19, 2007
Economic statistics show the U.S. economy is plugging right along, but Federal Reserve Chairman Ben Bernanke still sees plenty to worry about. In an appearance before Congress, the Fed chairman said he thinks we might be in the "calm before the storm."
What's got Bernanke worried is the rising tide of federal deficits and interest rates. It will all be made much worse, he warns, when America's baby boomers -- the first of which turned 60 last year -- begin to retire.
Without significant reforms to Social Security and other entitlement programs for the elderly, he says deficits could sink the U.S. economy.
Right now most boomers are still at work, drawing paychecks and paying Social Security taxes. Once they retire, money will flow the other way. Government spending on Social Security payments and various Medicare benefits will surge from the current seven percent of the nation's gross economic output to nearly 13 percent by 2030.
"We are experiencing what seems likely to be the calm before the storm," when roughly 78 million Baby Boomers begin being eligible for Social Security next year," Bernanke told the Senate Budget Committee
This isn't the first time alarm bells have been sounded over Social Security. In 1983 Congress addressed the problem by approving a significant increase in the Social Security tax, providing a large operating Social Security surplus.
Where's the money now? Congress has used it to pay for other things, technically writing IOUs for the funds, which theoretically will be paid back at some future date. With the debt to Social Security in the billions of dollars now, Congress has never exactly explained how it intends to pay the money back.
In his appearance before Congress Thursday, Bernanke said it's time lawmakers gave the question a little thought.
In fact, Benanke said the time to address Social Security issue was "about 10 years ago."
