FEDERAL RESERVE CHIEF ALAN Greenspan warned against deficits and Moves that would cut Social
Security
Nobel Prize winning eoconomist Joseph
Stiglitz told Amy Goodman (Feb 25, 09) that if the BAIL OUT money to BANKSTERS had
just been given to the SOCIAL SECURITY system, patching the HOLE that BUSH
admitted was there, we’d have fixed AMERICA! That the big TSUNAMI of Social Security Administration failing was
just ahead!
MAY
2007 NEW YORK (CNN/Money) - Fed Chairman Alan Greenspan warned
Congress Wednesday to take quick action to fix the nation’s
swollen budget deficit—including measures that could cut some future Social
Security payments—to avoid even bigger problems for the nation’s economy down
the road.
The central bank
chairman also repeated his assertion that recent tax cuts should be made
permanent and said cutting spending was a better way to fix the deficit than
tax increases. Greenspan, in remarks for delivery to the House Budget
Committee, noted that the recent surge in the deficit is particularly
dangerous, coming less than a decade before Baby Boomers begin drawing on
federal retirement benefits, putting an ever bigger strain on government
resources. (THE GREEN IS a period of SURPLUS, ENDING 2001, AND THEN with
WTC/ 911, the DEFICITS START UP.
“This dramatic demographic change is certain to place enormous
demands on our nation’s resources—demands we almost surely will be unable to
meet unless action is taken,” he said in his remarks. “For a variety of
reasons, that action is better taken as soon as possible.”
Greenspan said that, if the demographic shift is permanent—and
rising longevity makes that a realistic prediction—then “significant structural
adjustments” to Social Security and Medicare would be necessary, particularly
since Medicare benefits could skyrocket as medical technology advances.
He proposed some solutions that would reduce future Social
Security benefits to retirees, including raising the ages at which retirement
benefits are paid and changing the inflation measure used to index the payments.
He later denied that he was specifically suggesting that Social
Security payments be cut, saying he was merely suggesting better “technical
means” of setting benefits.
But the changes he suggested would cut benefits—raising the
retirement age would result in people drawing benefits for a shorter period of
time, and his preferred index for cost-of-living increases, the chained
consumer price index, would result in smaller benefit increases than the
traditional CPI if recent trends continue.
No impact
on current retirees?
Greenspan
said the government should pay the obligations it already owes to people at or
near retirement, adding that any changes to future retirees’ benefits should be
decided as soon as possible so those people can adjust their retirement plans.
In separate remarks to reporters in Washington, President Bush
weighed in on the issue, echoing Greenspan’s assertion that near-term Social
Security obligations be met.
“My position on Social Security benefits is this: Those benefits
should not be changed for people at or near retirement,” Bush said, Reuters
news agency reported.
Democrats on the House Budget Committee, in their comments to
Greenspan, expressed dismay about the prospect of cutting Social Security
benefits to make cutting taxes easier—a hint the issue could heat up ahead of
the presidential election.
Greenspan also said greater budget discipline was needed, and he
bemoaned the recent expiration of Congressional rules that enforced such
discipline.
While acknowledging that recent tax cuts had helped worsen the
budget picture, Greenspan said he favored cutting spending rather than raising
taxes, suggesting tax hikes could hurt the economy.
“I am fully aware of the fact that it may not be possible to
keep the tax rate down and still maintain some semblance of deficit control,”
Greenspan said in response to a lawmaker’s question. “But ... I would strongly
recommend that the priority of evaluations start with the expenditure side:
what can be constrained, what can be reduced.”
$500 billion deficit seen Earlier this month, President Bush
unveiled a budget forecast that projected a deficit of more than $500 billion,
which would be the biggest ever in dollar terms. As a percentage of gross
domestic product (GDP), it seems likely to be the biggest since the mid-1980s.
However, the forecast did not include hundreds of billions of dollars for other
costs, such as military expenses in Iraq.
Greenspan said the deficit spending of recent years has helped
the economy recover from the 2001 recession, and some economists don’t think the
deficit is a short-term problem for the economy.
But Greenspan and other economists have warned that, over time,
persistent deficits and high government debt will push interest rates higher,
hurting economic growth and the nation’s living standards.
“If no action is taken at all ... we’re going to be confronted
within a few years with a marked upward ratcheting of long-term interest rates,
which is very debilitating to long-term economic growth,” Greenspan said in
response to a lawmaker’s question.
In the short term, Greenspan said, the economy seems to have
gathered strength and that “prospects for sustaining the expansion” are good.
He said household and business balance sheets were stronger, the
Fed’s super-low interest-rate target was still “highly accommodative,” and that
fiscal stimulus would also help the economy this year, while productivity would
keep inflation low.
Still, he was not particularly bullish about job growth, which
has long been a glaring weak spot in an otherwise healthy economy.
“Overall, the economy has lately made impressive gains in output
and real incomes, although progress in creating jobs has been limited,” he said.
This view seemed unlikely to change market expectations that the
central bank will keep its target for a key short-term interest rate, already
at the lowest level in more than 40 years, unchanged at least until the summer.