Federal Reserve Chair Asks Congress To Reduce Medicare, Social Security Benefits
Federal Reserve Chair Alan Greenspan on Wednesday urged Congress to act quickly to reduce Medicare and Social Security benefits, warning that continued increases in the federal budget deficit could cause economic "stagnation" in the years to come, the Washington Post reports (Henderson, Washington Post, 3/3).
According to the New York Times, Greenspan "has made similar pleas in the past," but on Wednesday he "spoke more urgently" in testimony before the House Budget Committee (Andrews, New York Times, 3/3). Although the hearing focused on Social Security, Greenspan said Congress needs to move quickly to consider possible benefit cuts for Medicare before baby boomers begin retiring (Espo, AP/San Francisco Chronicle, 3/2).
He said that it is "utterly inappropriate" and "unfair" to promise retirement benefits that cannot be delivered. "In the end, the consequences for the U.S. economy of doing nothing could be severe," he noted, saying, "If existing promises need to be changed, those changes should be made sooner rather than later" (Crutsinger, AP/Las Vegas Sun, 3/2).
Greenspan said that Medicare is a much larger problem than Social Security because health care costs are difficult to predict (Kirchhoff, USA Today, 3/2). He added that unless growth in both programs is curtailed, Medicaid and Medicare spending will increase from 8% of the gross domestic product in 2003 to 13% by 2030.
The resources needed to maintain the programs seem "increasingly likely to make current fiscal policy unsustainable," Greenspan said, adding, "Something's got to give. We have to find a better model" (Washington Post, 3/3). He noted that addressing the problem will require "scrutiny of both spending and taxes."
According to the Times, the Bush administration "played down" Greenspan's comments.
White House spokesperson Trent Duffy said, "The president does have a substantial deficit-reduction package. His budget is a continuation of that policy, and he looks forward to working with Congress in cutting that spending down. Likewise, the president agrees that the long-term budget is the issue, which is why he's trying to lead a national discussion and reform movement to save and strengthen Social Security."
The House and Senate are expected to unveil budget proposals as early as next week (New York Times, 3/3).
NPR's "Morning Edition" on Thursday included an interview with David Wessel, Wall Street Journal deputy Washington, D.C. bureau chief, about a report conducted by CMS analysts and published on the Health Affairs Web site last month finding that U.S. health care spending growth will continue to stabilize over the next 10 years, but public programs will account for almost half of total health care spending by 2014, in large part because of the new Medicare prescription drug benefit (Montagne, "Morning Edition," NPR, 3/3). The complete segment is available online in RealPlayer.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.