Greenspan: Social Security Status Quo Not Sustainable
November 07, 2003
Chairman’s Remarks Echo NCPA Research
WASHINGTON, DC (Nov. 6, 2003) – Fed Chairman Alan Greenspan gave an ominous diagnosis of the nation’s Social Security system and the impact it will have on the economy if it is not reformed, in a speech today to the Securities Industry Association. Matt Moore, Senior Policy Analyst with the National Center for Policy Analysis (NCPA) agreed, and noted the Chairman’s comments echo NCPA research.
According to Moore, over the next 15 years 77 million baby boomers will stop paying into the Social Security system and will instead begin to collect benefits, creating a shortfall of more than $25 trillion just for Social Security. “Barring fundamental reform, by 2018 Social Security will no longer be able to pay all the benefits it has promised,” said Moore. “To maintain the current system and pay promised benefits fully, Congress will be forced to choose between raising taxes dramatically or increasing the national debt by more than 600 percent.” (http://www.ncpa.org/pub/st263/) For more information on Social Security issues visit www.teamncpa.org.
The following is an excerpt of Chairman Greenspan’s relevant remarks:
“Remember that in just five years the first cohort of the baby-boom generation will reach 62, the earliest age at which Social Security retirement benefits may be claimed and the age at which about half of the prospective beneficiaries choose to retire. In about 2008, the proportion of the working-age population that will retire is projected to begin escalating. Almost surely, the Social Security and Medicare benefits that are promised under current law to future retirees cannot be financed with existing tax rates. [emphasis added]
“Budget simulations by a broad range of analysts (including those at the Office of Management and Budget and the Congressional Budget Office) suggest that the rapid increase in the unified budget deficits that would occur under current law as the baby-boom generation retires could set in motion an unsustainable dynamic in which large deficits result in growing interest payments that augment deficits in future years. Such a development could have notable, destabilizing effects on the economy.
“Increased productivity growth, while helpful, does not alter that conclusion, because when productivity growth increases, so do Social Security obligations and, indirectly, Medicare benefits as well. Productivity would have to grow at a rate far in excess of the historical average to fully resolve the long-term financing problems of Social Security and Medicare.
At the same time, the dimension of the challenge, especially in later years, cannot be underestimated. The one certainty is that the resolution of this situation will require difficult choices, and the future performance of the economy will depend on those choices.”