August 22, 2006 10:05 AM
Greenspan Again Backs Plan for Private Accounts
Excerpt: Federal Reserve Chairman Alan Greenspan again endorsed President Bush's proposal to offer private accounts for Social Security as White House allies went on the offensive against critics of the plan.
Federal Reserve Chairman Alan Greenspan again endorsed President Bush's proposal to offer private accounts for Social Security as White House allies went on the offensive against critics of the plan.
In issuing one of his toughest warnings yet to Congress about the danger of letting the nation's giant budget deficits persist, Mr. Greenspan told the House Budget Committee Wednesday that "the consequences for the U.S. economy of doing nothing could be severe" and that without "major deficit-reducing actions" the deficit isn't likely to shrink much in the next few years.
But he said that Congress's failure to act quickly to fix the financing problems in Social Security and Medicare will only make the country's budgetary problems more severe. He repeated a warning he first made a year ago, saying he believed the government had promised more than it could deliver to the 78 million baby boomers now approaching retirement.
Meanwhile, Republicans attacked the AARP as well as congressional Democrats on Wednesday as they struggled to build momentum behind President Bush's call for private investment accounts under Social Security.
The AARP, which claims 35 million members age 50 and over, is "against a solution that hasn't been written yet," said House Majority Leader Tom DeLay after a closed-door meeting with the Republican rank and file. House Speaker Dennis Hastert of Illinois called Democrats "the party of no" for their refusal to back the president's plan.
The Fed chairman, who didn't discuss monetary policy, again backed Mr. Bush's private-accounts plan. Last month, Mr. Greenspan had urged a go-slow approach, but in his prepared testimony, he didn't repeat the cautionary message he sent last month: Creation of the accounts should be done slowly to gauge the impact the increased borrowing that will be needed will have on financial markets.
In questioning by lawmakers, Mr. Greenspan declined to describe Social Security as facing an immediate crisis. "Nothing is about to fall off the cliff in the next two or three years," he said, adding "that doesn't mean that we shouldn't be addressing it now. It is an exceptionally serious problem."
Mr. Greenspan said "the challenge of Medicare is far more problematic than that associated with Social Security." That's because the rising life expectancies and medical costs mean Medicare's costs will continue to rise dramatically.
Messrs. Hastert and DeLay talked with reporters after meeting with lawmakers just back from a week spent sampling public opinion on Social Security. Mr. DeLay said the session produced "not one negative comment by the members." However, both he and Senate Majority Leader Bill Frist left open the possibility on Tuesday that final action may not be possible this year, and the Texas Republican conceded that opponents of Mr. Bush's plans were better organized than supporters.
But Messrs. DeLay and Hastert said Republicans are determined to move ahead with Mr. Bush's proposals and several Republicans said they believe the president's national campaigning is slowly raising public awareness of the issue. "We're still early in the process," said White House spokesman Scott McClellan.
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