Greenspan Discusses Challenges of Aging U.S. Population
aging U.S. population will significantly affect the countrys
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 populationlargely
the result of declining fertility rates after the post-World
War II baby boom and Americans increasing lifespanswill
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.
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 forces 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 nations 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.