Fed President Says US on "Unsustainable Course"

Kansas City Federal Reserve Bank President Thomas Hoenig says U.S. fiscal policy is on an "unsustainable course" and the government must adjust its tax and spending programs or risk a crisis.

"The U.S. government must make adjustments in its spending and tax programs. It is that simple. If pre-emptive corrective action is not taken regarding the fiscal outlook, then the United States risks precipitating its own next crisis," said Hoenig.

"In time, significant and permanent fiscal reforms must occur in the United States."

Hoenig said a government faced with rising debt levels must come up with a credible long-term plan to reestablish fiscal balance.

That plan must be seen as fair, said Hoenig, and those who put it in place must be wiling to disappoint special interests.

"It means, for example, controlling budget earmarks, trimming subsidies to numerous economic sectors, and resolving our banking problems and the perception that Wall Street is favored over Main Street, all of which would otherwise foster mistrust and cynicism among the public," Hoenig said.

The Obama Administration recently sent Congress a $3.8 trillion budget blueprint, with a $1.3 trillion deficit, for fiscal year 2011. That follows a forecasted record deficit of $1.6 trillion in fiscal 2010.