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Associated Press
Greenspan Warns on Baby Boomer Benefits
Friday August 27, 10:22 am ET
By Martin Crutsinger, AP Economics Writer
Greenspan Warns of 'Abrupt and Painful' Choices Unless Baby Boomer
Benefits Are Trimmed
JACKSON, Wyo. (AP) -- Federal Reserve Chairman Alan Greenspan said
Friday 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 boom generation.
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 possible changes
would be raising the retirement age to receive full Social Security
benefits, which currently is gradually increasing from 65 to 67.
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.
But he said it was important to be careful in how those deficits were
addressed. 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 policymakers 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 Americans.
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
adjust.
"Though the challenges of prospective increasingly stark choices for the
United States seem great, the necessary adjustments will likely be
smaller than those required in most other developing countries," he
said, noting that Europe and Japan will have a much higher proportion of
retirees to current workers in coming years.
Greenspan has repeatedly this year addressed the looming crisis in
Social Security and Medicare, a development that the presidential
candidates have chosen to virtually ignore given the painful choices
that will likely be presented to the next president.
Greenspan Warns on Baby Boomer Benefits
Friday August 27, 10:22 am ET
By Martin Crutsinger, AP Economics Writer
Greenspan Warns of 'Abrupt and Painful' Choices Unless Baby Boomer
Benefits Are Trimmed
JACKSON, Wyo. (AP) -- Federal Reserve Chairman Alan Greenspan said
Friday 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 boom generation.
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 possible changes
would be raising the retirement age to receive full Social Security
benefits, which currently is gradually increasing from 65 to 67.
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.
But he said it was important to be careful in how those deficits were
addressed. 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 policymakers 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 Americans.
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
adjust.
"Though the challenges of prospective increasingly stark choices for the
United States seem great, the necessary adjustments will likely be
smaller than those required in most other developing countries," he
said, noting that Europe and Japan will have a much higher proportion of
retirees to current workers in coming years.
Greenspan has repeatedly this year addressed the looming crisis in
Social Security and Medicare, a development that the presidential
candidates have chosen to virtually ignore given the painful choices
that will likely be presented to the next president.