Federal Reserve Chairman Alan Greenspan today urged Congress to consider cutting future benefits for Social Security recipients. Here’s part of what this AP story includes:
“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.
The method Greenspan suggests to cut benefits seems very similar to that recommended in “The 2% Solution: Fixing America’s Problems in Ways Both Liberals and Conservatives Can Love” by Matthew Miller. That method requires indexing benefit increases to price, not average wage, increases.