Fed chief Bernanke spells out home truths on financing the future

US OUTLOOK

Will someone please listen to Ben Bernanke? The Federal Reservechairman becomes more shrill in his warnings about the US governmentdebt crisis every time he speaks publicly. At the National PressClub this week, instead of patiently explaining the problem ineconomese, his previous style, he dropped the sort of alarmistlanguage that politicians might hear. The US risks getting into a"vicious circle" of widening deficits and soaring interest paymentson existing debt, he said. "There is only so far that we can kickthe can down the road."

It might seem odd that the Fed chair has got so agitated whendeficit reduction already tops the political agenda. The Tea Partyhas rolled into Congress, Republicans are trying to pull together$100bn in cuts from federal programmes this year, and the WhiteHouse is pushing a freeze on domestic spending until 2016. Butlisten to Mr Bernanke. These exhausting fights over whether to snipan extra billion dollars or two from the foreign aid budget couldnot be more irrelevant to the issues that keep the Fed chairmanawake nights. Discretionary spending - the stuff that Congress hasto approve every year - accounts for barely 12 per cent of thefederal budget.

The long-term fiscal challenges facing the US are the product ofpowerful underlying trends, Mr Bernanke warned, not short-term ortemporary factors. The two most important driving forces for thefederal budget are the ageing of the US population and rapidlyrising health-care costs. It is after 2020 that these two cometogether, when the baby-boomers will have largely left theworkforce, be living off social security and receiving government-sponsored healthcare. These locked-in entitlement programmes are theones that have to be cut.

Mr Bernanke could not have been more explicit. The debt projectedfor the next decade - when the federal government will go from owing90 per cent of the country's annual GDP in 2020 to 150 per cent in2030 - is impossible. Other nations will not fund it.

The retirement age has to go up, and there has to be a massiveeffort to reduce government healthcare costs. This doesn't have tomean death panels for the elderly. Sustained pressure on costs,including on drug-maker margins and on ambulance-chasing lawyers,will mean big savings for government - and they will relievepressure on consumers and businesses, too.

A small number of big initiatives to cut benefits in the 2020swould be far more effective (and less dangerous to the economicrecovery) than a large number of small initiatives to cutdiscretionary spending now. Bold reform of future retirement andhealthcare entitlements could boost the confidence of financialmarkets and foreign investors dramatically and hold down long-terminterest rates, stimulating the economy now. Listen to Mr Bernanke.Take care of the long term and the short term will take care ofitself.

Real news with just a little application

Rupert Murdoch is responsible for more of what he likes to call"shoe-leather reporting" - real news-gathering by reporters on thebeat - than almost any other person in the private sector. From SkyNews and Fox News, to The Sun and The Times in London and The NewYork Post and The Wall Street Journal here, he already has the worldcovered. So why on earth has he created The Daily?

Aside from the innovation that The Daily is the first news-gathering organisation to make its wares available only on tabletcomputers (for now, only on the Apple iPad), it fails to stand outfrom any of the other news sources providing their content free.That is sad, but it is not what I find most objectionable about thephilosophy behind The Daily. It is the redundancy.

How many reporters does the world need producing beautifullycrafted words on the latest US snowstorm (on the cover of TheDaily's second issue)? Especially since there is a blizzard of snowphotos and video on Facebook and YouTube. Straightforward businesslogic will catch up with the news industry in due course: we don'tneed to produce more and more of a commodity that is crashing inprice. News brands need to retrench to whatever it is they douniquely well, whether it is serving a group of loyal followers of aparticular political bent, or doggedly pursuing exclusive stories.

None of this is to say that there shouldn't be innovation on theformat in which news content is delivered. The creation of thetablet computer has opened up a fantastic new medium for deliveringhigh-quality journalism, and for combining online and offlinematerial in ways that are impossible on the traditional internet.

There is a great irony in Mr Murdoch's News Corporation creatingyet another news-gathering centre in The Daily when, internally, ithas been trying to grapple with the issue of redundancy. The mogulhas indeed tried to grapple with the question: how many reporters doI really need reporting from the icy frontline of the US storm, orany other big story, for that matter.

The company has an in-house wire service called NewsCore, whichpackages material from across all its news brands, whether in NewYork or far-flung outposts in Australia, for shared use. Thefrustration for those who produce NewsCore is that it has facedresistance from the individual news titles, who prefer to operate intheir silos.

A little NewsCore content has appeared in The Daily, but not much- yet. A really bold move would have been to break down the barriersbetween News Corp's titles and serve up an iPad app using the bestof the company's content, focusing less on gathering more news andmore on delivering it in fun, interactive, iPad-friendly ways.

The NewsCore app: that's what Mr Murdoch should have launchedthis week.