Financial Update (Fourth Quarter 2004)


 Appraisal Reviews
 Maintain Soundness

 GLBA Spurs
 Banks’ Insurance

 Conference Focuses
 on Remittances

 New Fed
 Brochures About
 Check 21

 Fed Distributes
 Redesigned $50s

 Atlanta Fed Chair,
 Vice Chair

 Will Privacy
 Concerns Prolong
 Cash Use?

 Fed Governor
 Sees Oil Prices
 Staying High

 Greenspan on
 Challenges of
 Aging Population

 Helping Consumers
 Avoid Overdrafts

 Examining Fannie
 Mae and
 Freddie Mac


 Data Bank

 Circular Letters



Greenspan Discusses Challenges of Aging U.S. Population

The aging U.S. population will significantly affect the country’s future fiscal situation, Federal Reserve Chairman Alan Greenspan said recently. In remarks at a Federal Reserve Bank of Kansas City symposium, Greenspan noted that the aging of the population—largely the result of declining fertility rates after the post-World War II baby boom and Americans’ increasing lifespans—will make elder dependency a key economic issue in the coming years.

Funding Social Security and Medicare
“As a nation, we owe it to our retirees to promise only the benefits that can be delivered,” Greenspan said. Most observers expect Social Security in its current form to run a chronic deficit over the long term, he noted, but because Social Security is a defined benefit program, necessary adjustments would be limited. However, shortfalls in Medicare will present even larger and more difficult challenges, he believes, because the program faces financial pressure from not only the changing composition of the population but also increasing per-recipient demand.

Chairman Greenspan’s remarks
“Paradise Found (or Lost)?” (EconSouth Q3 2004)
“Employment Growth and Labor Force Participation: How Many Jobs Are Enough?”
Speech by Gov. Gramlich on Social Security reform

The ability of the United States to fund future retirement benefits, Greenspan said, will depend on the growth rate of not only the workforce but also that force’s productivity. But the growth rate of the U.S. working-age population is expected to slow over the next two decades and beyond, placing workers under greater pressure to provide benefits to retirees. One policy that could spur U.S. productivity growth, according to Greenspan, would be a long overdue upgrading of primary and secondary education to help workers prepare for intellectually demanding, higher-tech jobs.

Making the right policy choices
Several options could increase the nation’s workforce and thus shore up retirement programs, Greenspan noted. One would be to expand immigration. The influx of foreign workers could help mitigate the decline of labor force growth as it did in the tight labor markets of the 1990s.

Tough policy choices lie ahead if the United States is going to create the infrastructure that will allow the country to adjust to the demands of the aging population, Greenspan concluded. “While I do not underestimate the difficulties that we face in the United States, I believe that, given the political will, we are better positioned than most others to make the necessary adjustments,” he said.