Fix budget quickly, Greenspan says

WASHINGTON — Federal Reserve Chairman Alan Greenspan urged Congress Wednesday to move quickly to fix the financing problems in Social Security and Medicare, arguing that delay will only make the country's budgetary problems more severe.

Greenspan again endorsed the key part of President Bush's Social Security overhaul to set up private accounts. But he said Congress needed to do other things to put Social Security and Medicare on a more sound financial footing given the impending retirement of 78 million baby boomers.

While saying that Congress should move quickly to consider possible benefit cuts for Social Security and Medicare before the baby boomers begin retiring, Greenspan, as he did a month ago, urged a go-slow approach to setting up Bush's proposed private accounts.

The administration estimates those accounts will require about $745 billion in new borrowing over the next decade. Greenspan said it is difficult to judge what impact that increased borrowing will have on financial markets, and for that reason, the government should move cautiously to keep from triggering higher interest rates.

"I think it is very important that you move gradually and see what the response is," Greenspan said.

He said it is entirely possible that the impact on interest rates will be "zero," but he said since that can't be forecast with total confidence "cautious and gradual" was the best approach.

Bolstering the administration's drive to get a Social Security reform bill enacted this year, Greenspan warned that every year of delay would make fixing the problem harder, especially after the baby boomers begin retiring.

Bush's proposal for private accounts has proved to be a hard sell.

"This is the mother of all issues," House Majority Leader Tom DeLay said Tuesday, as Republican congressional leaders conceded that they may not be able to win congressional approval of it this year.

Senate Majority Leader Bill Frist said Bush will have to take a lead in building support for private accounts, especially "when a lot of political figures want to run and hide and when you have a lot of people who say there's no problem."

In his testimony Wednesday, Greenspan repeated a warning he first made a year ago, saying he believed the government had promised more than it could deliver to the baby boomers now approaching retirement and saying that cuts in benefits would have to be considered.