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Fri 27 Aug, 2004 06:11 pm
Greenspan urges cuts to Social Security, Medicare
Reuters News Service
JACKSON, Wyo. -- An aging U.S. population will strain public finances and hurt the economy without swift fixes to the social safety net, such as raising the age for full retirement benefits, Federal Reserve Chairman Alan Greenspan said today.
"If we have promised more than our economy has the ability to deliver to retirees without unduly diminishing real income gains of workers, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels," Greenspan said at an annual symposium at a mountain retreat in Wyoming.
"If we delay, the adjustments could be abrupt and painful."
The Fed chief said raising payroll taxes to fund shortfalls in Social Security and Medicare might only worsen the situation by imposing an extra burden on workers. He said altering policy to encourage a longer working life for Americans would help.
Greenspan, who at 78 is an example of an American who chose to work longer, said failing to recognize the looming problems would only aggravate them.
Medicare faces a bleaker future than Social Security, both because of the changing composition of the population and rising medical costs.
U.S. Social Security trustees earlier this year estimated the program's trust fund assets would be exhausted in 2042. They said benefit payments would start outstripping income in 2018. Medicare payments are expected to outpace income into the hospital insurance trust fund this year, with the fund being tapped out in 2019.
FUTURE FOCUS
Greenspan made no mention of current economic conditions or interest-rate policy in his address to the group of central bankers, academics and economists.
This year's topic for the annual Jackson Hole symposium is the impact of demographics -- specifically aging populations -- on the global economy.
Greenspan said the United States, which has been relatively open to immigration, is better-placed to cope with demographic stresses than some other countries, particularly if American policy-makers and politicians face the need to reform entitlement programs.
"Though the challenges of prospective increasingly stark choices for the United States seem great, the necessary adjustments will likely be smaller than those required in most other developed nations," the Fed chief said.
He said declining birth rates mean population growth in Europe and Japan "have fallen far short of the replacement rate" -- the birth rate needed to keep the population constant in the absence of immigration or changes in lifespans.
A potential doubling of the over-65 U.S. population by 2035 will put substantial pressure on budget deficits and it is important to consider how to deal with the issue to protect the overall economy.
"Financing expected future shortfalls in entitlement trust funds solely through increased payroll taxes would likely exacerbate the problem of reductions in labor supply by diminishing returns to work," Greenspan warned. He said it would be preferable for Americans to work longer.
"Changes to the age for receiving full retirement benefits or initiatives to slow the growth of Medicare spending could affect retirement decisions, the size of the labor force and saving behavior," he said, leaving no doubt that was his preferred option.
Any measure that proposes curbing retirement benefits, whether directly or through raising eligibility ages, is a hot-button issue for politicians and for lobby groups.
Greenspan said rising rates of productivity -- or hourly output per worker -- offer one of the best routes to boosting national output so future retirees can maintain living standards without overburdening those still working.
But productivity has been growing exceptionally fast for years and it is hard to keep increasing it through capital additions alone, he said.
"One policy that could enhance the odds of sustaining high levels of productivity growth is to engage in a long overdue upgrading of primary and secondary school education in the United States," he added, saying this would give a new generation of workers the skills they need to be competitive.
The sorry so and sos can waste trillions on wars with Iraq and other ways to squander tax dollars, but withhold our safety net. eb
eb : here in canada the new "liberal" government has also been making noises about a later retirement age. so far the actuaries calculating the obligations of the canada pension fund have stated that there is no need to advance the retirement age ! it is of course one thing for someone like mr. greenspan or the canadian prime minister to advocate later retirement and something quite different for someone who has done hard manual work for many years to continue working beyond age 65 (if they ever reach it !). i was lucky to get out on a reasonable pension at an earlier age and feel that is one of the best presents mrs. h and i ever got (she agrees with me !). hbg
I can get full SS at age 70. If they raise the age beyond that, they are crazier than even I thought they were.
eb : in canada, the canada pension plan(supported by employers and employees) pays full pension at age 65 - earlier, reduced pension payments are allowed. the 'old age security' is payable after a minimum of ten years residence in canada(minimum payments increasing gradually); no direct contributions have to be made to this plan and every resident is entitled to payment. these pensions are in addition to any company pension one might have. mrs. h and i are lucky, since we worked in germany for eight years before coming to canada, we are also entitled to a small pension from germany. we feel that we have the best of both worlds, growing up in(and receiving a pension from) germany and now living for 48 years in canada. seems we made the right move at the right time ! hbg
I guess they need a trillion more weapons programs more than they need to pay attention to their own citizens.
Thanks for posting this, edgar. I had the article (NYT version) copied to post a thread earlier today but got too busy. My question was going to be, you think this was the Bush administration's plan all along?
They have long wanted to kill these programs. Greenspan is no friend of the people, as I have said all along.
sozobe wrote:Thanks for posting this, edgar. I had the article (NYT version) copied to post a thread earlier today but got too busy. My question was going to be, you think this was the Bush administration's plan all along?
I think not. My impression is that the Bush administration couldn't care less about the actual content of their policies -- it's all PR. To assume they have a plan on anything -- even an evil plan -- is to overestimate their seriousness about policies as opposed to politics.
Anything to enrich themselves and their buddies seems to be the driving policy, in my view.
edgarblythe wrote:Anything to enrich themselves and their buddies seems to be the driving policy, in my view.
I wouldn't argue with you if you said this was a factor in the war on Iraq; there's no question those rising oil prices greatly benefit Mr. Bush's and Mr. Cheney's friends in the oil extracting business. But on the Social Security issue, I don't see the particular buddies being enriched. Do you?
Perhaps a plan gone awry?
Perhaps. The placebo plan on Social Security which they wrote into their 2000 campaign platform was firmly grounded in faith-based arithmetics, and the nature of actual arithmetics shamelessly betrayed their faith. You might call that a plan gone awry, if only you can bring yourself to calling it a plan.
I'm going to steal that phrase, Thomas. "Faith-based arithmetics" indeed!
I believe they have a true plan of doing away with every vestiage of the safety net, although for the life of me, don't know why. They spend more of our tax dollars than anybody else, so I know it can't just be resenting the spending aspect.
Of course this is part of their plan. The plan in 2000, and addressed again recently but I'll need to find the link, is for social security savings plans. I never found where they really spelled this out so I am not sure how it would work. I thought at first that it would "allow" workers to put an amount they wanted into a savings account for retirement. Other wording has made me think it would still be mandatory, but the worker or the government - not sure who - would put the funds into the stock market.
From the latter, I figured the benefit to the Bush admin. would be multiple: Carlyle, Oil, Weapons builders, Alcoa, Halliburton, etc.
With perpetual war, those would be the highest paying/ presented as safest stocks AND puts the workers "savings" right into the hands of the corporate CEO's (Baker, Poppy, Cheney, etc.)
Greenspan, by suggesting a change right away in how SS is handled is playing right into the Bush plan. Note that I call it the Bush Plan, but it is really the plan of the PNAC.
http://www.informationclearinghouse.info/article1665.htm
FDR dedicated the New Deal to "freedom from fear." He believed that government's role was not to provide handouts to the poor, but to provide a certain minimum level of security against the everyday catastrophes that ruin people's lives.
It is this minimum level of economic security that George Bush and modern movement conservatives want to abolish. In fact, it's the point of Bush's "ownership society": if everyone owns their own Social Security account, their own healthcare account, and their own college account, then the government no longer provides security against disaster. If you make a mistake, or if the market makes a mistake, you're screwed.
squinney wrote: In fact, it's the point of Bush's "ownership society": if everyone owns their own Social Security account, their own healthcare account, and their own college account, then the government no longer provides security against disaster.
Not necessarily true. As I understand the arithmetically sane proposals for Social Security privatization, the accounts would work a lot like 401Ks. You can invest your 401K entirely in inflation-indexed government bonds, in which case your account is as safe as any promise by the federal government, including its promise to pay you Social Security benefits when you retire. The problem with Bush's 2000 "reform"-"plan" is that it's arithmetically insane, not that it's about privatizing the system as opposed to tweaking its current structure.
squinney wrote:If you make a mistake, or if the market makes a mistake, you're screwed.
And if the federal government makes a mistake in the current system, you're screwed even harder, as any German with a sense of history will tell you. In the 20th century, Germans lost their entire retirement pensions because their government failed them -- twice. (1923 and 1939-45)
Up til now, in modern history, each time the government has "reformed" SS the public has lost something. I would not object if the system became like my 401K if it shored up my coming benefits instead of shrinking them.
governments reforming or improving anything is much like "new and improved" detergent. the way the new products are being advertised, you'd think the old stuff must have been just awful.hbg
No, that's the bone they're tossing the conservatives who want to see it killed as a matter of principle.
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