A grim warning to
Greenspan implores lawmakers to address benefits
By Martin Crutsinger: The Associated Press; Aug. 28, 2004
Wyo. - Federal Reserve Chairman Alan Greenspan said yesterday that the country
will face "abrupt and painful" choices if Congress does not move quickly to trim
the Social Security and Medicare benefits that have been promised to the baby
Returning to a politically explosive issue that he
has addressed a number of times this year, Greenspan said that it was wrong for
the government to hold out the promise of more retirement benefits than it is
capable of providing.
He said this issue was particularly critical
given the impending retirement of 77 million baby boomers born in the two
decades after World War II.
"As a nation, we owe it to our retirees to
promise only the benefits that can be delivered," Greenspan said in opening
remarks to a two day conference sponsored by the Federal Reserve Bank of Kansas
City on the challenges posed by aging populations.
"If we have
promised more than our economy has the ability to deliver, as I fear we may
have, we must recalibrate our public programs so that pending retirees have time
to adjust through other channels," Greenspan said. "If we delay, the adjustments
could be abrupt and painful."
Greenspan, as he has done previously,
suggested that one possible fix would be again raising the retirement age to
receive full Social Security benefits, which currently is being gradually
increased from 65 to 67.
Greenspan has said that perhaps retirement
age should be continually adjusted as life expectancies increase.
looming crisis in Social Security and Medicare has received little attention in
the presidential race, although the programs will likely present the next
president with painful choices.
Neither President Bush nor Democratic
presidential candidate John Kerry has offered a detailed prescription for
bringing sufficient money into the program.
Bush favors giving younger
workers the option of putting part of their payroll tax into personal retirement
accounts, in return for smaller Social Security benefits, or staying with the
Social Security system.
Kerry opposes that plan for partial
privatization. He says the way to strengthen Social Security is to "grow the
economy, create jobs and increase revenues into the program.
Greenspan, who is 78 and was recently confirmed for a fifth term as Fed
chairman, has been a proponent of raising the retirement age ever since he was
chairman of a commission that recommended a number of changes to rescue Social
Security from impending insolvency two decades ago.
In his remarks,
Greenspan said that the projected doubling of the U.S. population over the age
of 65 by 2035 would add to the government's budget deficit woes.
he said it was important to be careful in how those deficits were
He said that relying entirely on an increase in the payroll
tax on workers to deal with the funding shortfall in Social Security and
Medicare would make it more costly for employers to hire workers.
Greenspan said policy-makers must consider all the economic impacts that changes
in the government's two biggest benefit programs would entail such as the effect
on retirement decisions, the size of the labor force and the saving behavior of
Greenspan acknowledged that any decisions to trim benefits
or boost payroll taxes could be difficult politically, but he said those
decisions must be made and made quickly to give baby boomers time to
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