Fed Chair Ben Bernanke likes to couch his language so that it doesn’t look like he’s saying anything dramatic, but the nut of his speech today on fiscal reform lays it out pretty plainly near the end:The ultimate goal of the commission’s efforts should be to put us on a path to fiscal sustainability. One widely accepted criterion for sustainability is that the ratio of federal debt held by the public to national income remain at least stable (or perhaps even decline) in the longer term. This goal can be achieved by bringing spending, excluding interest payments, roughly into line with revenues. Unfortunately, most projections suggest that we are far from this goal, and that without significant changes to current policy, the ratio of federal debt to national income will continue to rise sharply. Thus, the reality is that the Congress, the Administration, and the American people will have to choose among making modifications to entitlement programs such as Medicare and Social Security, restraining federal spending on everything else, accepting higher taxes, or some combination thereof.
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