Greenspan: Deeper Budget Crisis When Baby Boomers Retire

By Agence France-Presse The United States will plunge into an even deeper budget crisis unless it curbs benefits for baby boomers, warned Federal Reserve Chairman Alan Greenspan. Greenspan told a congressional panel the current budget woes will be exacerbated when people born in the baby-boom generation start retiring in 2008. "This dramatic demographic change is certain to place enormous demands on our nation's resources -- demands that we almost surely will be unable to meet unless action is taken," Greenspan warned. "For a variety of reasons, that action is better taken as soon as possible." Pointing to "enormous uncertainty" about future health costs and to the massive pension commitments, the 77-year-old central bank chairman pressed lawmakers to examine and cut spending. The government could curb outlays by postponing the retirement age or by using a new inflation index for annual increases benefits that would be cheaper than the current "cost of living" index. Greenspan said people in or near retirement should get what they have been promised. Any changes must be made soon enough to let people prepare their retirement finances. He also renewed a call for lawmakers to revive expired legislation, known as Paygo, which had once forced Congress to offset any budget impact of proposed spending increases or tax cuts. Despite the gloomy news, Greenspan says the short-term economic outlook was bright. "The most recent indicators suggest that the economy is off to a strong start in 2004 and prospects for sustaining the expansion in the period ahead are good," he told lawmakers. Copyright Agence France-Presse, 2004