- The Washington Times - Wednesday, February 25, 2004


Federal Reserve Chairman Alan Greenspan, stepping into the politically charged debate over Social Security, said yesterday the country can’t afford the benefits currently promised to the baby boom generation.

He urged Congress to trim those benefits to get control of soaring budget deficits, which he said threatened a “very debilitating” rise in interest rates in coming years.

Democratic presidential candidates denounced his proposals, and President Bush and other Republicans sought to distance themselves from the Republican Mr. Greenspan.

Mr. Greenspan also repeated his view that Mr. Bush’s tax cuts should be made permanent to bolster economic growth. He said the estimated $1 trillion cost should be paid for, preferably, with spending cuts so the deficit would not be worsened.

As for specifics on trimming Social Security, Mr. Greenspan told the House Budget Committee that one possibility would be to switch to an alternative measure of inflation for annual cost-of-living adjustments. Instead of relying on the Consumer Price Index, he suggested switching to a new chain-weighted CPI that gives lower inflation readings and would mean smaller payment increases.

Mr. Greenspan, who turns 78 next week, also suggested tying the retirement age for full benefits to longer lifespans with the age continuing to rise. The 65-year age for retiring at full benefits started increasing last year and now stands at 65 years and four months. It will increase to 67 over the next two decades and then stop rising.

Mr. Greenspan said his comments simply voiced views he has held since he headed a blue-ribbon commission two decades ago. But the remarks created a political storm.

Democratic presidential front-runner Sen. John Kerry said the way to address the deficit was to roll back tax cuts for the wealthy and “the wrong way to cut the deficit is to cut Social Security benefits. If I’m president, we’re simply not going to do it.”

Sen. John Edwards, North Carolina Democrat and presidential candidate, called it “an outrage” for Mr. Greenspan to call for cuts in Social Security while at the same time endorsing making Mr. Bush’s tax cuts permanent. Rep. Dennis J. Kucinich, Ohio Democrat and also running for president, called for Mr. Greenspan to resign, saying his comments were “a disgrace.”

President Bush said that Social Security benefits should not be changed for people at or near retirement.”

Underscoring the view that Congress is not about to touch Mr. Greenspan’s suggestions, especially in an election year, House Speaker J. Dennis Hastert, Illinois Republican, was asked to comment on the proposals and replied only, “He’s a fine man.”

In testimony before the Budget Committee, Mr. Greenspan said the current deficit situation, with projected record red ink of $521 billion this year, will worsen dramatically once the 77 million members of the baby boom generation start becoming eligible for Social Security benefits within a half-dozen years.

Mr. Greenspan said projections show the country will go from having just over three workers supporting each retiree to 2.25 workers for every retiree by 2025.

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