Greenspan Calls For Social Security Benefits Cuts
Alan Greenspan says Congress should start cutting Social Security benefits for future retirees.
Greenspan, chairman of the Federal Reserve Board, emphasized in testimony before the U.S. House Budget Committee that he spoke for himself, not the Fed.
But he warned that the federal governments return to deficit spending and the effects that the aging of the baby boomers will have on Social Security funding levels require the government to take action as soon as possible.
Otherwise, he says, ever-growing interest payments could lead to even bigger deficits.
“The resulting rise in the federal debt could drain funds away from private capital formation and thus, over time, slow the growth in living standards,” he said.
Increases in productivity and increases in tax rates could help bring down budget deficits, Greenspan conceded, but noted that rising productivity could lead to higher wages and, in turn, increase workers Social Security benefit expectations.
Tough scrutiny needs to be applied to taxes, but “tax rate increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base,” Greenspan said.
The government should honor current commitments to retirees and to workers who are near retirement, he said, but should change the system as quickly as possible for younger workers, so they will have time to adjust their retirement savings plans.
Few observers expect Congress to make a serious effort to cut Social Security benefits during an election year.
AARP, Washington, immediately attacked Greenspans remarks. “The notion that Social Security should be a prime target to fix future budget deficits that are unrelated to the program is irresponsible,” says AARP Chief Executive William Novelli. “Social Security should not be a resource for negotiators over the federal budget deficit. In fact, Social Securitys own growing surpluses currently make the deficit in the rest of the federal budget appear smaller.”
But Greenspans recommendations could help Bush administration officials and financial services trade groups promote partial privatization of the Social Security program.
Reproduced from National Underwriter Life & Health/Financial Services Edition, February 27, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.