In testimony before the US House of Representatives Budget Committee, Greenspan said lawmakers need to make the cuts affecting future retirees soon enough for them to plan on getting more of their retirement income from sources other than the government – including 401(k) and pension plans, the Associated Pres reported. Greenspan said current retirees’ benefits shouldn’t be reduced. Surveys have shown that many Americans aren’t setting aside nearly enough for an adequate retirement income stream and many are being overcautious in their current investment portfolios.
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 inflation
He also said that the retirement age should be indexed to take into account longer lifespans. He noted that the current 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. Greenspan said Congress should go beyond that now and index the retirement age so that it will continue rising.
“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.”
Greenspan warned that the current $521-billion
federal deficit will worsen dramatically once the baby
boom generation starts becoming eligible for Social
Security benefits in 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.”
While Greenspan urged urgency, Congress is unlikely to take up the controversial issue of cutting Social Security benefits in an election year.