Greenspan: Cut Social Security

[Dreamer128]

By Glenn Somerville
WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan on Wednesday said Congress should weigh trimming future Social Security benefits by raising the retirement age and offering less generous adjustments to future payments.

The influential Fed chief's comments stirred political ripples, with Democratic presidential front-runner John Kerry saying he would never curtail benefits and Capitol Hill Democrats saying Bush administration tax cuts were to blame.

President Bush said he would safeguard those at or near retirement -- something that Greenspan suggested as well -- but did not rule out reduced outlays in future.

Urging swift action on a spiraling budget deficit -- forecast to hit a record $521 billion this year -- Greenspan told the U.S. House of Representatives Budget Committee that spending restraint was the best way to meet future commitments rather than raising taxes and endangering the economy.

"The exact magnitude of such risks is very difficult to estimate, but they are of enough concern, in my judgment, to warrant aiming to close the fiscal gap primarily, if not wholly, from the outlay side," he said.

Greenspan warned a major budget crunch looms as early as 2008 as tens of millions of Baby Boomers, born after World War II, begin to qualify for early retirement benefits.

"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. "For a variety of reasons, that action is better taken as soon as possible."

SETTING AN EXAMPLE?

Greenspan, who turns 78 next week, repeated a suggestion that the remedies available to lawmakers included raising the age at which Social Security and Medicare benefits are provided. But in an increasingly heated political climate, his comments this time ignited a debate.

"No matter what was said in Washington just this morning, the wrong way to cut the deficit is to cut Social Security benefits," Kerry said during a speech at the University of Toledo. "If I'm president, we are simply not going to do it."

Even with the "so-called normal retirement age" set to climb to 67 from 65 in the next two decades, the years people spend in retirement relative to their working years will increase as Americans are living longer, Greenspan said.
"In view of this upward ratchet in government programs and the enormous uncertainty about the upper bounds of future demands for medical care, I believe that a thorough review of our spending commitments -- and at least some adjustment in these commitments -- is necessary for prudent policy," the Fed chief emphasized.
On Capitol Hill, leading Democrats on two influential panels claimed that while Greenspan had rightly identified a problem, it was the wrong one.

"Mr. Greenspan has it backwards. He portrays Social Security as the problem. But in reality, the high deficits brought on by Bush Administration fiscal policies are the problem. Those fiscal policies are now threatening Social Security," said Charles Rangel of New York and Robert Matsui of California.

Matsui sits on the Social Security subcommittee and Rangel is on the tax-writing ways and means committee.

DEFICITS CLOUD ON HORIZON

In response to questions, Greenspan said failure to tackle looming budget issues would push long-term interest rates higher -- a potential damper on the economy -- though he did not foresee that in the near future.

In fact, he characterized the immediate outlook as relatively bright -- optimism that boosted the U.S. dollar.

"The most recent indicators suggest that the economy is off to a strong start in 2004, and prospects for sustaining the expansion in the period ahead are good," the Fed chief said, adding the economy has turned the corner on an anemic recovery.

He lamented that a brief stretch of budget surpluses from 1998 to 2001 had sapped lawmakers' will to curb spending and cautioned that unless rules obliging spending rises to be covered by savings in other areas were reimposed, "the inbuilt political bias in favor of red ink" would be set in concrete.

Greenspan said if Congress were to opt to reduce social security benefits, it would be better to do so quickly to minimize the pain on Americans near retirement, and so others would have time to prepare for a smaller piece of the retirement pie.

"If changes need to be made, they should be made soon enough so that future retirees have time to adjust their plans for retirement spending and to make sure their personal resources, along with what they expect from the government, will be sufficient to meet their retirement needs," he said.

[Source: Reuters]

[Azred]

Social Security, as it currently exists, is the problem here. It was initially created to be a buffer to help those in desperate need during the Depression, but we are not in a depression and haven't been since the 1930s. Instead of a tax cut or tax rebate, dismantle Social Security and let people decide how best to spend or invest the extra 6.2% they would subsequently receive.
I must admit that my own grandmother relied somewhat on her Social Security checks for many years, but that was mainly due to the fact that my grandfather died before his time, and life insurance went only so far in the mid 1970s. However, these days I honestly feel that if you are not taking care to plan for your own retirement--no one else is going to take care of you--then you are an idiot and you deserve what you get.

Oh, wait...that would require people to educate themselves about finance and become responsible. How foolish of me to expect that!

[Timber Loftis]

Even with the "so-called normal retirement age" set to climb to 67 from 65 in the next two decades, the years people spend in retirement relative to their working years will increase as Americans are living longer, Greenspan said.

I don't know how much I'm buying this. With the average life expectancy at 77, this only gives a decade of retirement on average. Is that enough time to enjoy the fruits of a life's worth of toils?

Ideally, as a nation advances economically, its people should enjoy an increased standard of living. I think an increased standard of living would include a decrease of the number of hours worked per week and/or a decrease in the retirement age. Americans, however, are working longer hours for more years. Are we starting a downturn in our overall national economic story?

[Oblivion437]

No, we're just banging out schemes and hustles and means to bigger bucks longer. Work now, have fun later. Young people today are pissed to high heaven at their slacker image (fostered by MTV among others) and parents and grand parents are pissed to high heaven at their slacker kids (who won't work, apparently) and they've all banded together and said, "To hell with it, We'll work till we burn out!" It's as Neil Boortz said, you don't have a right to someone else's work, property, talent or time. You didn't pay for it. For that matter, what right have you to a job? If I don't need your services, you have no right demanding I hire you.

Libertarian economics would work the best... With the additional 6.2% I'd keep on pumping it into investments and opportunities until I turned say, 55. My business teacher, through his own thrift, won't need a dime of SS money when he retires.

I'd rather, as Azred said, disband the system.

[John D Harris]

Azred,Obliv, 7.8%+-(for both SS & medicare) "Hale" give me the 7.8%+- my business also has to throw in, that I'd get paid if the business didn't have to give it to the gov't, for a total of 15.6%+-. I'll invest that myself. 7.8% goes to pay Payroll taxes, your employer matches that amount, if they didn't have to match that amount they could pay you the additional 7.8%.

This is what I found funny: "Capitol Hill Democrats saying Bush administration tax cuts were to blame." I don't know what world these Capitol Hill Democrats live in, but Payroll taxes(Social Security, & Medicare taxes) were not cut in any shape form of fashion. The brainchilren(Dems & Reps both fall into this catagory) on Capitol Hill have been screaming about SS since I entered the work force in the late '70's. They will continue to scream about it and do nothing meanwhile we bendover grab our ankles and say "Please sir give me another"

[ 02-27-2004, 10:07 AM: Message edited by: John D Harris ]