Greenspan Urges Social Security Cuts Feb 25, 11:25 AM (ET) By MARTIN CRUTSINGER (AP) WASHINGTON (AP) - Federal Reserve Chairman Alan Greenspan urged Congress on Wednesday to deal with the country's escalating budget deficit by cutting benefits for future Social Security retirees. Without action, he warned, long-term interest rates would rise, seriously harming the economy. In testimony before the House Budget Committee, Greenspan said the current deficit situation, with a projected record red ink of $521 billion this year, will worsen dramatically once the baby boom generation starts becoming eligible for Social Security benefits in just four years. He said the prospect of the retirement of 77 million baby boomers will radically change the mix of people working and paying into the Social Security retirement fund and those drawing benefits from the fund. "This dramatic demographic change is certain to place enormous demands on our nation's resources - demands we will almost surely be unable to meet unless action is taken," Greenspan said. "For a variety of reasons, that action is better taken as soon as possible." But while Greenspan urged urgency, Congress is unlikely to take up the controversial issue of cutting Social Security benefits in an election year. Greenspan, who turns 78 next week, said that the benefits now received by current retirees should not be touched but he suggested trimming benefits for future retirees and doing it soon enough so that they could begin making adjustments to their own finances to better prepare for retirement. Greenspan did not rule out using tax increases to deal with the looming crisis in Social Security, but he said that tax hikes should only be considered after every effort had been made to trim benefits. "I am just basically saying that we are overcommitted at this stage," Greenspan said in response to committee questions. "It is important that we tell people who are about to retire what it is they will have." He warned that the government should not "promise more than we are able to deliver." While the country is currently enjoying the lowest interest rates in more than four-decades, Greenspan warned that this situation will not last forever. He said financial markets will begin pushing long-term interest rates higher if investors do not see progress being made in dealing with the projected huge deficits that will occur once the baby boomers begin retiring. "We are going to be confronted ... in a few years with an upward ratcheting of long-term interest rates which will be very debilitating for long-term growth," Greenspan told the committee if the deficit problem is not addressed. Greenspan suggested two ways that benefits could be trimmed. He said that the annual cost-of-living adjustments for those receiving benefits could be made using a new version of the Consumer Price Index called the chain-weighted index, which gives lower readings on inflation. He also said that the age for retirement should be indexed in some way to take into account longer lifespans. He noted that presently the age for being able to get full Social Security benefits is rising from 65 to 67 as one of the changes Congress adopted in the mid-1980s, based on recommendations of a commission Greenspan chaired. In his testimony, Greenspan said Congress should go further and index the retirement age so that it will keep rising. As he has in the past, Greenspan called on Congress to reinstitute rules that require any future tax cuts to be paid for either by spending cuts or increases in other taxes. While that would erect a high hurdle to President Bush's call for making his 2001 and 2003 tax cuts permanent, estimated to cost at least $1 trillion over a decade, Greenspan again repeated his belief that spending cuts rather than tax increases were the best way to deal with the exploding deficit. While not ruling out totally the use of tax increases to deal with at least part of the looming surge in spending on Social Security, Medicare and other entitlement programs, Greenspan urged caution in increasing taxes. "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 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."
I'd personally like to reduce Social Security benefits to ZERO. The notion that the government can provide for my retirement better that I can is absurd. If you want to invest your own money, you should not be forced to hand it over to the government. We need a total overhaul of the pay-as-you-go system.
Hey, I actually agree with TJ. In the meantime, we need to call SS what it is, welfare for old people and eliminate the SS tax and raise the income tax to replace the lost SS tax, and phase SS out.
Watch out for that Third Rail George! ____________ Bush Opposes Benefit Cuts for Near-Term Retirees Wed February 25, 2004 12:05 PM ET WASHINGTON (Reuters) - President Bush said on Wednesday he thought that cuts to Social Security benefits should be off-limits to those at or near retirement age, a position that differed from that of Federal Reserve Chairman Alan Greenspan. "My position on Social Security benefits is this: Those benefits should not be changed for people at or near retirement." Bush's comments came in response to a question from a reporter after Greenspan said in testimony to a congressional committee that Congress should consider pushing up the retirement age and offering less generous increases in Social Security benefits.
I'm not gonna claim that I know how to fix such a complicated issue. I will however call everybody in Congress, yep everybody, all parties involved, completely gutless if they don't make some cuts and chnages to Soc Sec BEFORE the baby boom generation starts collecting.
Almost everyone gets money out who put money in, and IIRC disabled people were eligible for SS and underage dependents in certain circumstances. Even when the original payees get much more money out than they put in. Last time I heard most of the eligible age esteemed members of SCOTUS get it and their salary is pretty high nowadays. So it essentially is a pyramid scheme relying on more and more new donors. There is no test for recipient current income or assets. If you are Bill Gates at 68, retire, and have put money in, you will get money out until you die no matter how much income you have. A means test would be some sort of threshold of income and assets for eligibility. This would make Social Security more like welfare instead of a Ponzi scheme.
While I can't claim to know everything about this issue (but who can, other than Greenspan?) I'd say means testing, as suggested, is a grand plan. We NEED a social safety net, particularly for the elderly. And, here's a nice bit of common sense that will definitely be ignored - AGAIN;
Though I would love to do away with Social Security and any government mandated savings program aside from tax-deferred accounts, I don't see it happening because of the political debris that goes along with it. But at least Greenspan is trying to eliminate the bias in the CPI, which SS payments are attached too. The CPI accounts for changes in not only the value of money but for the change in the standard of living. Therefore when people put money into social security, they are not only beating inflation but attaining a higher standard of living, which was not the point of social security. With too many people depending on it we can't just cut if off, but we must slowly eliminate it over decades and replace it with the current promising legislation regarding tax deferrred savings plans and higher amounts available to invest in IRA's etc.
As a proud member of the Baby Boom I would like to tell Gen X and Y , " I will gladly suck your paycheck dry and add it to the proceeds I obtained during the biggest stock market bubble in history so I can sip margaritas on the pool deck of my luxury home on the beach in Mexico". So, you better get politically active.
So, you are a proponent of having a large population of homeless, poverty stricken elderly people, huh? If you look at the history behind SS, it came about because of that very situation. Regular workers did not have the means to save for retirement and as such, elderly people were a large underclass living in poverty. Huge numbers of elderly were homeless beggars living in the streets. Social Security is a small price to pay.
Means testing could save money ASAP, just not certain how much. Also, we should allow SS funds to be invested in stock market, real estate, whatever, to give it a fighting chance. Does it even earn interest now? Is there really a huge deposit of SS funds, or did the feds 'borrow' it for other purposes? I think some net for low income folks is important, but for the rest of us I would rather see a program where we can save our own money (tax free) and invest as we see fit. But any phasing-out should take into account what the hell's already been paid in. Only the federal government could get away with 'deposit your retirement funds here', then 'sorry, you really don't need it' or even worse, 'sorry, we don't have it anymore'.
I would rather control my own retirement vs. the govt., regardless who's in office...It's just a fact that this system is robbing Peter to pay Paul...
It has been "borrowed" in part to pay for everything Bush (and Clinton, and Bush before him) has been spending money on. Gore had a plan to lock that money up (his "lockbox"), but that is a moot point now. The continuing issue is that some people simply cannot afford to save and invest their own money. Perhaps we could create a required investment account that the person has some measure of control over, but there has to be some kind of net for low income seniors in order to keep them from becoming impoverished and homeless again. This is the biggest reason that we should make every effort to reform the current system rather than scrapping it for a new one.
You do control your own retirement. If you think that you are going to live high on the hog with social security as your income, you are sorely mistaken. Social security simply provides a safety net so that the large percentage of people who simply cannot afford to put money away have something to fall back on. I, for one, do not want to see the elderly become the biggest demographic among the homeless, as they were before social security came about.
