Federal Reserve Chairman Ben S. Bernanke has warned that Americans may have to accept higher taxes or changes in cherished entitlements such as Medicare and Social Security if the nation is to avoid staggering budget deficits that threaten to choke off economic growth.
"To avoid large and ultimately unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above," he said.
His remarks highlighted the difficulties posed by funding these entitlement programs over the long term. With the population aging and medical costs rising faster than inflation, Medicare is set to become a major drain on the federal budget in the coming decades, though the recently passed health-care bill has delayed the date when the program will begin to require big infusions of cash.
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