Blinder warns Medicare spending threatens deficit control

Former Vice Chairman of the Federal Reserve Alan Blinder warned Monday that Medicare spending will "swallow up everything" and threaten attempts at deficit control without action to curb costs.

Blinder, a former Clinton White House economic adviser, said there is "no chance" to reduce the deficit unless the United States "significantly reduces healthcare spending." He added that "cost cut benders" in President Obama's healthcare law might help, but it will take time to understand which are most effective.

Washington is embroiled in another budget battle over the debt ceiling, automatic cuts known as "sequestration" and Republicans' call for a balanced budget within 10 years. 

Speaking with Yahoo's "Daily Ticker" blog, Blinder warned the fight could lead to a government shutdown or a breach in the debt ceiling.

Blinder is promoting a new book — After the Music Stopped: The Financial Crisis, the Response and the Work Ahead — in which he writes that even reducing the deficit by 2.5 percent of gross domestic product would mean budget cuts worth $5 trillion.

"Republicans will have to concede that while it is arithmetically possible to do the entire job on the spending side, it is politically impossible," he writes. "Democrats will have to concede that the majority of deficit reduction must come on the spending side, including entitlements like Medicare."

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