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KAI RYSSDAL: So, whaddya want first, the good news or the bad?

Tell you what: I'll decide, I'll give you the good first.

The Commerce Department announced today consumer prices — that's inflation to you and me — was reasonably tame in December. And for the whole of 2006, downright nifty. Just 2 and a half percent.

We all know that's a number Federal Reserve chairman Ben Bernanke pays close attention to. Which makes his remarks today before a Senate Committee all the more interesting.

Marketplace's John Dimsdale has the story.

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JOHN DIMSDALE: At first, Bernanke was upbeat. The federal deficit has declined for two years in a row, he said, thanks to a strong economy and rising tax revenue.

But the Fed chairman called this the calm before the storm. Thunderclouds in the form of health care and social security spending for baby boomers loom dark on the horizon.

BEN BERNANKE: The longer we wait, the more severe, the more draconian. . . the more difficult the adjustments are going to be. I think the right time to start is about 10 years ago.

Bernanke endorsed no prescriptions, but said no change will mean the government's share of the overall economy, taxes and deficits will double in 25 years from 20 to 40 percent.

Bernanke's not the first Fed Chairman to warn about the government's unfunded obligations. His predecessor, Alan Greenspan, frequently told lawmakers they've made more promises than they can keep.

Economist Brian Bethune of Global Insight says efforts to fix entitlements in the past have faltered because of a weak economy.

BRIAN BETHUNE: So now that we've had an expansion for several years, it should be back on top of the list of the priorities for the new Congress.

But the window of opportunity for any deal is small, as presidential campaigning will soon shove bipartisanship aside.

In Washington, I'm John Dimsdale for Marketplace.