U.S. Federal Reserve Board chairman Alan Greenspan issued one of his toughest warnings yet to Congress yesterday about the danger of letting the country's giant budget deficits persist, saying "the consequences for the U.S. economy of doing nothing could be severe."
Testifying before the House budget committee, Greenspan endorsed the creation of private retirement accounts within Social Security, saying he favours a "significant personal accounts component." Greenspan said Congress must act to overhaul Social Security "sooner rather than later" because of the impending surge in retirements.
"I fear that we may have already committed more physical resources to the baby-boom generation in its retirement years than our economy has the capacity to deliver," Greenspan said.
"If existing promises need to be changed, those changes should be made sooner rather than later," Greenspan said.
Greenspan said worries about the budget are clouding the economic outlook, "especially in the longer run." Without "major deficit-reducing actions" by Congress, he said, the budget isn't likely to shrink much in the next few years.
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