Bernanke on Entitlements

The Washington Post reports:

Federal Reserve Chairman Ben Bernanke said Wednesday the burden from retiring baby boomers will strain the nation's budget and economy, unless Social Security and Medicare are revamped.

"Reform of our unsustainable entitlement programs" should be a priority, Bernanke told the Washington Economic Club. "The imperative to undertake reform earlier rather than later is great."...

Bernanke said that as the population ages, the United States will have to choose among higher taxes, fewer dollars for other programs, lower spending on entitlement programs, and a sharply higher budget deficit --or some combination of all those.

He is right, of course.

Being a circumspect Fed chairman, Ben does not tell us precisely what reforms he prefers, but his speech contains this hint:

A large increase in tax rates would surely have adverse effects on a wide range of economic incentives, including the incentives to work and save, which would hamper economic performance.

Once again, I agree.