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subject Ownership Key Soc. Sec. Goal Greenspan
By Tim Ahmann WASHINGTON (Reuters) - U.S. Federal Reserve Chairman Alan Greenspan embraced President Bush's vision of an ownership society on Thursday, saying private Social Security accounts could foster feelings of wealth among poor Americans. In a second straight day of congressional testimony, the influential Fed chief argued a personal accounts-based system would be less likely to face the type of fiscal crunch retiring baby boomers pose to the current pay-as-you-go program. While he did not specifically endorse Bush's plan and admitted private accounts, in and of themselves, would not improve Social Security's shaky finances, he said such accounts could importantly create a sense of ownership. These accounts, properly constructed and managed, will create ... a sense of increased wealth on the part of middle and lower-income classes of this society, who have had to struggle with very little capital, Greenspan told the House of Representatives Financial Services Committee. While they do have a claim against the Social Security system ... as best I can judge, they don't feel it is personal wealth the way they would with personal accounts, he said as he took questions from the panel. Greenspan went before the committee to discuss the Fed's semiannual economic report, but Bush's politically contentious proposal to create private accounts quickly became the hearing's focus. CRISIS? WHAT CRISIS? The president wants to let workers divert a portion of their Social Security payroll taxes into individual accounts as part of a larger overhaul intended to deal with a looming funding shortfall for the 70-year old system. Democrats are united against Bush's plan, which they say would endanger workers' retirement security and entail trillions of dollars in government borrowing since there would be less tax revenue to cover benefit payments. While embracing the concept of private accounts, Greenspan urged a go-slow approach because of uncertainty over how financial markets might greet such large-scale borrowing. Without changes, the Social Security trust fund will be exhausted in 2042. Experts say benefits need to be cut, taxes raised or a combination of both to ensure solvency. Continued ...
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