“We’re confronted with a really extraordinary event,” said Alan Greenspan. “A very large chunk of our workforce–the baby boomers–will be moving from a state of contributing funds during their working years to being recipients of those funds in retirement. I don’t think we’re ready for this.”
Greenspan, the U.S. Federal Reserve chairman until last year and now president of Greenspan Associates, a Washington, D.C.-based consulting firm, prognosticated on the growing challenge of funding America’s ballooning federal entitlement programs and the choices facing U.S. policy makers and retirees as a keynote speaker at the Million Dollar Round Table’s Boomertirement Industry Summit held here last week.
With respect to Social Security, Greenspan said, the political establishment had foreseen the current cash crunch at least since 1983, when he was a member of the Social Security Commission. Policy makers recognized then that they had “more than a quarter of a century to solve” the problem, yet have made little headway since. He estimated the current shortfall in the Social Security Trust Fund at approximately 2 percentage points of taxable income, adding the gap is “a large number, but not insurmountable.”
Greenspan noted also that funding the retirement program is a more manageable challenge than that of Medicare, which he characterized as “many multiples more difficult” to address. That is, in part, because Social Security’s long-term funding requirements can be accurately projected. The entitlement program offers a defined benefit for a senior population whose size and average life expectancy are rising as expected.
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“I suspect that if we had the political will to confront this issue, you could get together a group of technically competent people of both political persuasions and solve it in 20 minutes,” said Greenspan. “I say 20 minutes because the first 15 minutes would be devoted to be pleasantries.”
“[The solution] is no secret,” he added. “We know what the choices are. They’re limited and definable. The only thing missing is the political will to make these choices. But the longer we procrastinate, the longer a rational solution will be in coming.”
Options that politicians will have to consider, Greenspan said, include boosting the retirement age, increasing the Social Security payroll tax, reducing benefits and enacting legislation that encourages pre-retirees to extend their working years, even if in less than a full-time capacity. He noted, too, that many older boomers would like to rotate between periods of work and leisure, but that not enough employers have policies to accommodate them.