The Hindu Business Line : Greenspan sounds alert on retirement benefits

TOUCHING on a sensitive issue in an election year, the Chairman of the Federal Reserve, Mr Alan Greenspan, has warned America that it stands to face "abrupt and painful" choices if the Social Security and Medicare systems are not trimmed quickly to provide the baby boom generation what it was promised.

The warning from the Federal Reserve Chief also had a message to the politicians and for their election year rhetoric: Do not promise more by way of retirement benefits than what can actually be given.

Mr Greenspan's comments in Atlanta have been widely carried in the media , and are seen in the context of the nearly 80 million baby boomers born in the two decades after World War-II getting ready for their benefits.

"As a nation, we owe it to our retirees to promise only the benefits that can be delivered," said Mr Greenspan, currently serving the fifth term as the Chairman of the Federal Reserve.

"If we have promised more than our economy has the ability to deliver, as I fear we may have, we must recalibrate our public programmes so that pending retirees have time to adjust through other channels. If we delay, the adjustments could be abrupt and painful," he said.

Mr Greenspan suggested raising the retirement age to get full social security benefits. It is now being gradually raised from 65 to 67 years. The argument is to continually adjust this age bracket to keep in line with increases in life expectancy.

The Presidential candidates for the November 2 elections - the incumbent Republican, Mr George W. Bush and his Democratic challenger, Mr John Kerry, have addressed the problems of Social Security and Medicare but not with the kind of focus that some would have wanted.

Mr Greenspan cautioned that America's population in the `over 65 years of age' category is expected to double by 2035. It will hence add to the pressures of an already deficit ridden budget.

At the same time, concern has been expressed as to how the budget deficit should be addressed. The Fed Chairman believes that the Government should not rely only on increasing the payroll tax on workers to deal with the shortfalls in Social Security and Medicare as this would make it costly for employers to hire more workers.

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