(Washington, D.C.) – Citizens Against Government Waste (CAGW) today supported Federal Reserve Chairman Alan Greenspan’s diagnosis of Social Security while criticizing his proposals to diffuse the program’s looming financial crisis.  In a bold foray into the political arena, Greenspan proposed cutting future retirement benefits and raising the retirement age to alleviate budget deficits that will “worsen dramatically” when the baby boomers begin retiring in 2008. 

“Greenspan’s ideas for fixing Social Security are inadequate and will beget a cycle of benefit cuts and eligibility restrictions that will squeeze the program’s payout to barely a trickle,” CCAGW President Tom Schatz said.  “Years of trust fund fiction and runaway spending have led to the Social Security fund shortfall.”   

Testifying before Congress, Greenspan said that dramatic demographic changes will place “enormous demand on our nation’s resources, demands that we will almost surely be unable to meet unless action is taken.”  The present pay-as-you-go system transfers Social Security payroll taxes directly to beneficiaries.  As the number of workers shrinks compared the number of retirees, the program will run a deficit beginning in 2018, creating the need for benefit cuts, higher taxes, or both.  Social Security and Medicare will consume 40 percent of taxable wages by 2030 if the structure of the programs remains unchanged.               

“Sadly, it takes an unelected official to bring attention to what is potentially the most devastating problem facing the nation,” Schatz continued.  “Meanwhile, our elected leaders either deny or completely ignore the Social Security time bomb.  But higher taxes and benefit cuts are not the answer.  Only fundamental reform involving personal retirement accounts or outright privatization will offer today’s workers a chance for a livable retirement income.”  

Most of the public shares Greenspan’s pessimistic appraisal of Social Security.  A CNN/USA Today/Gallup poll in 2002 showed that Americans' biggest financial worry is the loss of their Social Security benefits.  A majority of Generation Xers expect the program to go broke before seeing a dime in benefits.  However, according to the latest Gallup poll, 62 percent of voters favor individual retirement accounts (including 83 percent of younger workers), which would increase the payout for future generations without cutting benefits for current retirees.     

“The public cannot afford to follow politicians into their dream world of denial,” Schatz concluded.  “We hope Chairman Greenspan’s reality check resonates with voters, especially with younger workers who could suffer crushing tax increases in their most productive years.  But cutting benefits is unnecessary when an economically feasible, politically popular alternative exists in the form of personal retirement accounts. ”

Citizens Against Government Waste is the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.