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Greenspan, Craig say Social Security 
is unsustainable without changes

(Feb. 27, 2003 - Washington, DC)-- At a hearing today on the economic impacts of global aging held by the U.S. Senate Special Committee on Aging, Federal Reserve Board Chairman Alan Greenspan said that America's aging population will have significant effects on the nation's fiscal situation.

"In particular," Greenspan said of the nation's fast growing senior citizen population, "it makes our Social Security and Medicare programs unsustainable in the long run."

America's population of senior citizens is expected to double in the next 30 years to 71 million - up from 12.4 percent today to nearly 20 percent of the population by 2030.  Worldwide, the number of senior citizens is projected to more than double in that same time from 420 million to 973 million. 

"I've been saying it and I'm glad to have Alan Greenspan say it.  This nation cannot continue with Medicare and Social Security without changes to both systems.  Those that say we can stay the course are just flat wrong." said Sen. Larry Craig (R-Idaho), Chairman of the Committee.

The Chairman of the Federal Reserve said that while changes are needed, raising payroll taxes is not the answer. 
 
"Aside from suppressing economic growth, large increases in payroll taxes can exacerbate the problem of reductions in labor supply, whereas policies that promote longer working life can ameliorate it," Greenspan said.  "In addition, policies that link increases in longevity over time to the eligibility age for Social Security, and perhaps Medicare, may need to be considered.  Such linkages would help protect the financial and, hence, the economic viability of these programs."

As the nation's population ages, the Chairman of the Federal Reserve said that he expects private pension assets "will almost certainly increase over the next decade."  Private pensions already account for about 12 percent of household financial assets in the United States.  Greenspan said that as the nation ages in the future, rising pressures on retirement incomes and a growing scarcity of experienced labor could induce greater numbers of older Americans to stay in or rejoin the workforce of the future.

"Fortunately, the U.S. economy is uniquely well suited to make those adjustments," Greenspan said.