Federal Reserve Chairman Alan Greenspan said time is running out for the U.S. to make the "increasingly stark choices" needed to pay Social Security and Medicare benefits as the baby boom generation retires.
"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 told a central bank conference in Jackson Hole, Wyoming. "If we delay, the adjustments could be abrupt and painful."
The U.S. budget deficit, which the Congressional Budget Office already projects to reach a record $420 billion this fiscal year, will widen "substantially" as the percentage of the population over 65 nearly doubles by 2035, he said, reports Bloomberg.
The issue is particularly critical given the impending retirement of about 77 million US baby boomers, born in the two decades after World War II, he said.
Greenspan suggested that delaying the age for full retirement benefits might be better than raising payroll taxes to fund the pension system, informs Xinhua.
According to the CNN News, the impact of the aging U.S. population will have a profound impact on the nation's fiscal situation, Greenspan said. He said it will be much easier to address the chronic deficit in the Social Security account than to address the shortfalls in the Medicare program which will be "much larger and much more difficult to eliminate."
"The combination of rapidly advancing medical technologies and our current system of subsidized third-party payments suggests continued rapid growth in demand, though future Medicare costs are admittedly very difficult to forecast," he said.
The challenge of funding retirement programs like Social Security and Medicare loom at the same that the U.S. budget deficit has swelled to record levels. Democrats have criticized the Bush administration for pushing through tax cuts that added to the deficit, while Republicans argue the deficit will shrink as tax cuts encourage greater investment and saving. Read earlier news stories by PRAVDA.Ru