Greenspan warns of deficit woes - Fed chairman cites impending
retirement of baby boomers
"There is no question that if you run substantial and excessive deficits over time you are draining savings from the private sector, and other things being equal, you do clearly undercut the growth rate of the economy," Greenspan said, pointing to the area where economists believe deficits inflict the most harm.
"I have no question that if we do not come to grips with these deficit issues, it will make it more difficult for us to maintain the type of growth rates" which will bring the unemployment rate down, Greenspan said.
He noted that 75 million baby boomers begin retiring at the beginning of the next decade.
Greenspan said the benefits mean Congress has promised a level of spending "in excess of our capability to finance it. ... When we get into the period beyond 2010 ... we are running into potentially serious troubles."
Greenspan didn't mention Bush's new deficit projections, which forecast record deficits of $455 billion this year and $475 billion next year, sharply higher than the administration's forecast earlier in the year.
Democrats on the committee seized on Greenspan's remarks.
"We're in the midst of some of the worst economic news we've
had in a long time, particularly the unemployment numbers," Sen.
Jack Reed, D-R.I., told Greenspan. "And the administration seems
to suggest more tax cuts and it'll get better. So the Congress has
passed more tax cuts and it's getting worse."
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