The News Courier in Athens, Alabama

State and Nation

March 2, 2013

Consequence to cuts no one thought would happen

(Continued)

—The Fed has kept short-term interest rates unusually low and printed money to keep downward pressure on longer-term rates, easing borrowing for businesses and individuals.

Yet retirees and other savers are earning near-zero interest on bonds and savings accounts, and many investors are jumping into riskier transactions in search of higher returns.

Fed Chairman Ben Bernanke and many mainstream economists argue that the Fed's stimulus policies have helped the housing and financial sectors recover and kept the downturn from getting worse.

One leading Fed critic Sen. Bob Corker, R-Tenn., accused Bernanke at a hearing last week of "throwing seniors under the bus" by driving down interest rates on their savings to almost nothing.

—The tax cuts of 2001 and 2003 were first proposed by Texas Gov. George W. Bush as he campaigned for president in 2000. At the time, the economy was enjoying rare multi-year budget surpluses and government economists were predicting surpluses well into the future. Bush told cheering audiences his tax cuts would return to taxpayers "what is rightfully yours."

Those cuts long have outlived the surpluses, which vanished in Bush's first year in office. Deficits returned with a vengeance and have grown ever since.

But most of them remain today, trimmed only slightly by the New Year's deal that ended Bush's tax breaks for households making over $450,000 a year.

Economists view those tax cuts as one of the biggest drains on the Treasury, and a major contributor to the spiraling government debt.

—Wars in Vietnam, Afghanistan and Iraq lasted far longer and cost much more, in terms of U.S. lives and dollars, than anticipated.

—Social Security has become one of the most expensive federal programs ever. When it was created in the 1930s, the average life expectancy was about 65. Longer life expectancies and the coming retirements of millions of baby boomers have put enormous strains on Social Security, as well as Medicare and Medicaid.

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