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Thread started 02/25/04 9:40am

XxAxX

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greenspan proposes social security cuts to balance budget deficit

from: http://money.cnn.com/2004...tm?cnn=yes

Greenspan warns against deficits

Central bank chief says deficits could hurt economy, suggests cutting Social Security benefits.
February 25, 2004: 12:15 PM EST

NEW YORK (CNN/Money) - Fed Chairman Alan Greenspan warned Congress Wednesday to take quick action to fix the nation's swollen budget deficit -- including cutting some future Social Security payments -- to avoid even bigger problems for the nation's economy down the road.

The central bank chairman also repeated his assertion that recent tax cuts should be made permanent and said cutting Social Security benefits and other spending was a better way to fix the deficit than tax increases.

Greenspan, in remarks for delivery to the House Budget Committee, noted that the recent surge in the deficit is particularly dangerous, coming less than a decade before Baby Boomers begin drawing on federal retirement benefits, putting an ever bigger strain on government resources.

"This dramatic demographic change is certain to place enormous demands on our nation's resources -- demands we almost surely will be unable to meet unless action is taken," he said in his remarks. "For a variety of reasons, that action is better taken as soon as possible."

Greenspan said that, if the demographic shift is permanent -- and rising longevity makes that a realistic prediction -- then "significant structural adjustments" to Social Security and Medicare would be necessary, particularly since Medicare benefits could skyrocket as medical technology advances.

He proposed some solutions that would reduce future Social Security benefits to retirees, including raising the ages at which retirement benefits are paid and changing the inflation measure used to index the payments.

The government should pay the obligations it already owes to people at or near retirement, he said, adding that any cuts in future retirees' benefits should be decided as soon as possible so those people can adjust their retirement plans.

In separate remarks to reporters in Washington, President Bush weighed in on the issue, echoing Greenspan's opinion.

"My position on Social Security benefits is this: Those benefits should not be changed for people at or near retirement," Bush said, Reuters news agency reported.

Democrats on the House Budget Committee, in their comments to Greenspan, expressed dismay about the prospect of cutting Social Security benefits to make cutting taxes easier -- a hint the issue could heat up ahead of the presidential election.

Greenspan also said greater budget discipline was needed, and he bemoaned the recent expiration of Congressional rules that enforced such discipline.

While acknowledging that recent tax cuts had helped worsen the budget picture, Greenspan said he favored cutting spending rather than raising taxes, suggesting tax hikes could hurt the economy.

"I am fully aware of the fact that it may not be possible to keep the tax rate down and still maintain some semblance of deficit control," Greenspan said in response to a lawmaker's question. "But ... I would strongly recommend that the priority of evaluations start with the expenditure side: what can be constrained, what can be reduced."

$500 billion deficit seen
Earlier this month, President Bush unveiled a budget forecast that projected a deficit of more than $500 billion, which would be the biggest ever in dollar terms. As a percentage of gross domestic product (GDP), it seems likely to be the biggest since the mid-1980s. However, the forecast did not include hundreds of billions of dollars for other costs, such as military expenses in Iraq.

Greenspan said the deficit spending of recent years has helped the economy recover from the 2001 recession, and some economists don't think the deficit is a short-term problem for the economy.

But Greenspan and other economists have warned that, over time, persistent deficits and high government debt will push interest rates higher, hurting economic growth and the nation's living standards.

"If no action is taken at all ... we're going to be confronted within a few years with a marked upward ratcheting of long-term interest rates, which is very debilitating to long-term economic growth," Greenspan said in response to a lawmaker's question.

In the short term, Greenspan said, the economy seems to have gathered strength and that "prospects for sustaining the expansion" are good.

He said household and business balance sheets were stronger, the Fed's super-low interest-rate target was still "highly accommodative," and that fiscal stimulus would also help the economy this year, while productivity would keep inflation low.

Still, he was not particularly bullish about job growth, which has long been a glaring weak spot in an otherwise healthy economy.

"Overall, the economy has lately made impressive gains in output and real incomes, although progress in creating jobs has been limited," he said.

This view seemed unlikely to change market expectations that the central bank will keep its target for a key short-term interest rate, already at the lowest level in more than 40 years, unchanged at least until the summer.
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Reply #1 posted 02/25/04 10:05am

TheOrgerFormer
lyKnownAs

Isn't Greenspan the guy that said the economy was getting better?
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Reply #2 posted 02/25/04 10:18am

XxAxX

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well, all i can say is i've been paying into the social security program all of my working days, and if the benefits 'disappear' before i'm eligible to collect on MY money then be warned - ima gonna be one mean, heavily armed, bank-robbing old lady lol
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Reply #3 posted 02/25/04 10:22am

Byron

XxAxX said:

well, all i can say is i've been paying into the social security program all of my working days, and if the benefits 'disappear' before i'm eligible to collect on MY money then be warned - ima gonna be one mean, heavily armed, bank-robbing old lady lol

lol
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Reply #4 posted 02/27/04 6:51am

Abrazo

Pretty unfair to suggest cuts on social benefits, because of the danger the (enormous) deficits pose, when these same deficits have been mainly caused by Bush's enormous military spending and tax cuts.

--
[This message was edited Fri Feb 27 6:52:34 2004 by Abrazo]
You are not my "friend" because you threaten my security.
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Reply #5 posted 02/27/04 7:11am

BanishedBrian

Abrazo said:

Pretty unfair to suggest cuts on social benefits, because of the danger the (enormous) deficits pose, when these same deficits have been mainly caused by Bush's enormous military spending and tax cuts.

--

Even if we repeal the Bush tax cuts and reduce military spending (which we should), it is absolutely irresponsible for anyone to suggest that Social Security can be salvaged in its current form.

When the baby boomers start to retire in a few years, the system is going to go bankrupt if left in its current form. Everyone is scared to speak up because it's politically unpopular to do so, but if the system is not reformed, the baby boomers' retirement will break the back of the next generation.

Here's the liberal Washington Post editorial page's take:



Regrettable Reactions

Friday, February 27, 2004; Page A22

FOR ALL THE front-page headlines, there wasn't anything particularly surprising in Federal Reserve Chairman Alan Greenspan's warning Wednesday that the government can't afford the Social Security benefits it has promised and that benefits will need to be curtailed. He's sounded this alarm before, correctly so. Sadly, there also wasn't anything surprising in the reaction of the presidential candidates, both President Bush and his Democratic rivals, to Mr. Greenspan's statements: All of them scurried as far as possible from any hint of endorsing a change in benefits, however reasonable. It's a measure of the irresponsibility of both political parties regarding the entitlements debate that a proposal for rather minor adjustments in Social Security would be treated like such a -- well, like such a dangerous third rail.

Mr. Greenspan noted that the leading edge of the baby-boom generation will begin to be eligible for Social Security benefits in 2008 and that the demands on both Social Security and Medicare will grow inexorably in the following years, so "we will eventually have no choice but to make significant structural adjustments in the major retirement programs." He suggested two modest changes that would ease, but not solve, the problem without unfairly punishing those on the brink of retirement. The first is changing the way Social Security benefits are adjusted to keep pace with inflation, replacing the existing consumer price index, which overstates increases in the cost of living, with a new, more accurate measure. The second is increasing the retirement age to reflect longer life expectancy; Mr. Greenspan suggested a form of indexing that would keep steady the ratio of years worked to years in retirement. Both suggestions are sensible, and both are rather standard fare in discussions of how to fix Social Security.

From the reaction, though, you would have thought Mr. Greenspan, who's about to turn 78 himself, had suggested taking old people out and shooting them. "No matter what was said in Washington just this morning, the wrong way to cut the deficit is to cut Social Security benefits," said Sen. John F. Kerry (D-Mass.) "If I'm president, we're simply not going to do it." Sen. John Edwards (D-N.C.) said it was "an outrage for him to suggest that we should extend George Bush's tax cuts on unearned wealth while cutting Social Security benefits that working people earn." Mr. Bush hastened to reiterate that he had no intention of changing benefits for those at or near retirement age -- Mr. Greenspan also had said he didn't want to make changes for that group -- and to restate his expensive proposal for private savings accounts.

Mr. Greenspan argues for making the Bush tax cuts permanent, and there we differ with him. Even without the tax cuts, Social Security was unsustainable; making all the cuts permanent deepens the hole. Indeed, Mr. Greenspan's modest but apparently incendiary suggestions underscore the magnitude of the challenge: The cost of the tax cuts would be about $400 billion in 2014, while the adjustments he proposes, even under a generous interpretation, would save less than $75 billion. But at least Mr. Greenspan -- unlike the president and his allies -- acknowledges the need for trade-offs. Mr. Bush won't admit that something's got to give; his Democratic rivals seem determined to compete in fiscal dishonesty. And they all pretend to offer leadership.
No Candy 4 Me
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Reply #6 posted 02/27/04 7:33am

Abrazo

BanishedBrian said:

Abrazo said:

Pretty unfair to suggest cuts on social benefits, because of the danger the (enormous) deficits pose, when these same deficits have been mainly caused by Bush's enormous military spending and tax cuts.

--

Even if we repeal the Bush tax cuts and reduce military spending (which we should), it is absolutely irresponsible for anyone to suggest that Social Security can be salvaged in its current form.

When the baby boomers start to retire in a few years, the system is going to go bankrupt if left in its current form. Everyone is scared to speak up because it's politically unpopular to do so, but if the system is not reformed, the baby boomers' retirement will break the back of the next generation.

Okay, to be clear, I am not saying that nothing should done about the baby boomers retirement and its inherent consequence of a major rise in government spending on social security.

As you say, the system is going to go bankrupt if left in its current form. To me this means if the entire system in its current form is left intact, including the system of excessive government military spending and tax cuts.

I think there can be little doubt that the consequences of the baby boomers pensions can be handled much better if the government deficits are not out of control, as they are right now, due to the excessive military spending and tax cuts.


--
[This message was edited Fri Feb 27 7:34:33 2004 by Abrazo]
You are not my "friend" because you threaten my security.
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Reply #7 posted 02/27/04 11:02pm

Greg55403

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Right now it takes 3 people to pay for one social security recipient, and it's fast approaching 2 workers to pay for the one recipient. And this is just one of our nation's many troubled social programs. I predict our government has less than 50 years before it collapses in on itself, and a revolution takes place. Lord help us all.

http://www.lp.org/
"All Hail King Bart!"
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Reply #8 posted 02/28/04 6:24am

sosgemini

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Greg55403 said:

Right now it takes 3 people to pay for one social security recipient, and it's fast approaching 2 workers to pay for the one recipient. And this is just one of our nation's many troubled social programs. I predict our government has less than 50 years before it collapses in on itself, and a revolution takes place. Lord help us all.

http://www.lp.org/



3to1 and almost 2to1? isnt that an improvement?

but your right.....we need to fix this issue...and fast..how about universal healthcare? then we dont need social security..

wink
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Reply #9 posted 02/28/04 6:24am

sosgemini

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XxAxX said:

well, all i can say is i've been paying into the social security program all of my working days, and if the benefits 'disappear' before i'm eligible to collect on MY money then be warned - ima gonna be one mean, heavily armed, bank-robbing old lady lol



your a, lady?

shocked
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Reply #10 posted 03/01/04 12:48am

Abrazo

sosgemini said:

Greg55403 said:

Right now it takes 3 people to pay for one social security recipient, and it's fast approaching 2 workers to pay for the one recipient. And this is just one of our nation's many troubled social programs. I predict our government has less than 50 years before it collapses in on itself, and a revolution takes place. Lord help us all.

http://www.lp.org/



3to1 and almost 2to1? isnt that an improvement?

but your right.....we need to fix this issue...and fast..how about universal healthcare? then we dont need social security..

wink

you need to FIRST quit spending so much damn BORROWED money on the military.
You are not my "friend" because you threaten my security.
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Forums > Politics & Religion > greenspan proposes social security cuts to balance budget deficit