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In a speech today before the Washington Economic Club, Federal Reserve Chairman Ben S. Bernanke warned the nation about its perilous fiscal situation. As the baby boom generation retires, entitlement spending will place a crushing tax burden on the remaining American workers. Bernanke described this harrowing future:
The fiscal consequences of these trends are large and unavoidable. As the population ages, the nation will have to choose among higher taxes, less non-entitlement spending, a reduction in outlays for entitlement programs, a sharply higher budget deficit, or some combination thereof. To get a sense of the magnitudes involved, suppose that we tried to finance projected entitlement spending entirely by revenue increases. In that case, the taxes collected by the federal government would have to rise from about 18 percent of GDP today to about 24 percent of GDP in 2030, an increase of one-third in the tax burden over the next twenty-five years, with more increases to follow.
Clearly, time is running out for Congress to begin actually setting assets aside to prepare for the future. Congress should immediately pass personal accounts to let younger workers own and control their own retirements.