Federal Reserve Bank of Atlanta President Dennis Lockhart said the U.S. government, and some state and local governments, must reduce the growth in budget deficits to a more sustainable level.
“In the public sector, municipal and state governments are facing mounting pension obligations in coming years that may prove to be underfunded,” Lockhart said today in a commencement speech at Georgia State University’s Andrew Young School of Policy Studies in Atlanta. “At the federal level, an unsustainable budget deficit and debt trends portend deep cuts and painful adjustments in the coming years.”
Lockhart didn’t comment on the economic outlook or monetary policy in his speech. The Federal Open Market Committee this week said the U.S. is maintaining its expansion even as global growth slows.
“We as a society are beset with serious problems that, at their source, are the fallout of irresponsible, or at least naïve, financial management,” Lockhart said. “There has been too much ‘kicking the can down the road,’ as they say, leaving problems for those who follow, for later generations. Financial problems won’t go away if we ignore them.”
Lockhart said some U.S. homeowners shared in fiscal irresponsibility by taking on debt they couldn’t afford and that U.S. banks have failed by becoming overly concentrated in risky loans, sometimes without adequate supervision. Georgia has led the nation in bank failures since 2007.
“The Atlanta Fed and other supervisors have acknowledged we could have done more as watchdogs, but first-order responsibility rests with the principals of those banks,” he said.
Lockhart, 64, a former Georgetown University professor, has led the Atlanta Fed since 2007. Fed presidents rotate voting on monetary policy, with Lockhart next voting in 2012. The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.