Greenspan's warning

When Federal Reserve chairman Alan Greenspan weighed in recently on Social Security, he knew his comments would stir up a firestorm. They did. But the heat didn't last long. For the most part, the nation has returned to its historic complacency about who will pay federally subsidized benefits when there is more money coming out of Social Security than is going into it.

Much of the response from Greenspan's remarks to the House Budget Committee came from current Social Security recipients who were concerned their monthly checks would go down. That's not what Greenspan suggested. He said benefits for future recipients -- those who haven't yet reached retirement age -- might have to be pared back. Like most anyone with any experience in government, even Greenspan knows it would be politically impossible to take benefits away from current Social Security retirees.

But Greenspan did suggest changing the way future increases in benefits are calculated. Under his proposed method, the yearly increases would be less than those currently based on changes in the Consumer Price Index. That too is enough to prompt protests from elderly Americans.

The ones who should be concerned most about Social Security are the baby boomers who start retiring in a few years. Because there are so many of them, the number of workers paying into the system for each benefits recipients will narrow even further.

While he was talking about Social Security, Greenspan also told his congressional audience that President Bush's tax cuts should be made permanent, and he said any deepening of the deficit should be offset by federal spending cuts.

Simple arithmetic will prove Greenspan correct: If you cut revenue and spending by the same amounts, there will no additional federal debt.

But the assumption that Congress will ever cut spending in large enough chunks to reduce the deficit is about as likely to happen as Congress taking a serious stab at resolving the looming Social Security crisis.

Without spending cuts, the only way to pay the federal government's bills is to have another sustained economic boom (not a sure thing), or raise taxes (which would pretty much forestall an economic boom). And the only way to make sure Social Security checks go out to baby boomers is to either cut their benefits or raise the Federal Insurance Contributions Act tax that is withheld from the paychecks of working Americans to fund Social Security benefits.

Greenspan's warnings are well worth heeding. But is anybody listening?