WASHINGTON —Federal Reserve Chairman Alan Greenspan issued a fresh call to Congress Tuesday to move promptly to put Social Security on firm financial footing, warning that doing nothing would lead to massive budget deficits and cause the "economy to stagnate or worse."
Greenspan, in prepared remarks to the Senate Special Committee on Aging, said the looming retirement of 78 million baby boomers will put a huge strain on the Depression-era retirement program and aggravate the country's already bloated budget deficits.
"Unless the trend is reversed, at some point these deficits would cause the economy to stagnate or worse," Greenspan said.
Greenspan once again endorsed a key part of President Bush's Social Security overhaul — to set up private investment accounts. But he said Congress needed to do other things to fix the retirement program's financing problems.
Congress will need to consider possible benefit cuts and higher tax rates before the baby boomers begin retiring, Greenspan suggested yet again.
But he cautioned that "closing the gap solely with rising tax rates would be problematic" because the high level of taxation that would be required could by itself "severely inhibit economic growth."
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