JACKSON HOLE, Wyo., Aug. 27 -- Federal Reserve Chairman Alan Greenspan today urged Washington policymakers to consider scaling back future federal retirement benefits, saying that the nation has probably promised more than the economy can realistically deliver.
Greenspan, himself, appeared to have pulled back from his more forceful comments on Capitol Hill earlier this year, in which he clearly called for restraining the growth in Social Security and Medicare spending by reducing benefits for future retirees. Those remarks, although echoes of warnings he has made for years, prompted a barrage of criticism, in large part because of the sensitivity of the topic in a presidential election year.
However, the Fed chairman made much the same point in more oblique language today, in remarks to a conference here on the economic impacts of global population changes.
"If we have promised more than our economy has the ability to deliver to retirees . . . as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust," Greenspan said. "If we delay, the adjustments could be abrupt and painful."
Greenspan, who chaired the 1983 commission that recommended several changes to shore up the Social Security program's finances, did not urge altering benefits in specific ways today. But he did note that a variety of changes in both federal programs and Americans' retirement and saving behavior could ease the "adjustments" that will have to be made as the population ages.
Americans, for example, could work longer, said Greenspan, 78, who has served as Fed chairman for 17 years. They are living longer and healthier. Work is "becoming less physically strenuous, but more demanding intellectually," he said. Yet workers have been retiring at younger ages in recent years.
One way to encourage workers to retire later, he suggested, would be to raise the age of eligibility for full retirement benefits or to slow the growth of Medicare benefits.
Americans also should save more, both as individuals and as a nation, he suggested. The individual saving rate is less than 2 percent, and the nation borrows an amount equivalent to about 5 percent of its annual gross domestic product from overseas to finance its spending and investment.
Without greater saving, he said, the country will not have the money to invest in the new technologies needed to continually boost worker productivity, or output per labor hour.
Rising productivity, he said, "offers the greatest potential for boosting" the economy's resources "to a level that would enable future retirees to maintain their expected standard of living without unduly burdening future workers."