Bernanke Prods Reform in Medicare, Social Security

Fed chief Ben Bernanke finally says what I've been saying for years: Medicare and Social Security are going to bankrupt this country if we don't do something soon.

Mr. Bernanke noted that the economy was still fragile, and he made it clear that he did not expect the federal government to raise taxes or cut spending anytime soon. But he spoke about the budget pressures posed by Social Security and Medicare with greater urgency than he has in the past.

“The arithmetic is, unfortunately, quite clear,” Mr. Bernanke said. “To avoid large and 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. These choices are difficult, and it always seems easier to put them off — until the day they cannot be put off any more.”

Democrats don't want to cut benefits, and Republicans don't want to raise taxes, but something must be done before it is too late.

Bernanke also commented on the Fed's response to the financial crisis, and added his two cents on financial reform.

“To end ‘too big to fail,’ the new regime should permit regulators to close a failing firm and impose losses on shareholders and creditors,” he said. “Indeed, I would argue that no financial instrument counted as regulatory capital should be allowed to receive any protection from losses.”

He's talking a good talk, but thus far it's only talk. We'll see if he practices what he preaches.