WASHINGTON, Aug 27 (AFP) - Federal Reserve Chairman Alan Greenspan called Friday for prompt action to keep the US retirement system solvent in the face of strains from the aging population.
Greenspan, speaking at the Fed's annual symposium in Jackson Hole, Wyoming, avoided any mention of the current pace of economic growth or the outlook for interest rates, disappointing those seeking clues on the Fed's views.
Instead, the Fed chief urged policymakers to consider "tough choices" to deal with the social security system, saying any delay in addressing the issue will only make adjustments "abrupt and painful."
"As a nation, we owe it to our retirees to promise only the benefits that can be delivered," Greenspan said.
Greenspan suggested that delaying the age for full retirement benefits might be better than raising payroll taxes to fund the pension system.
"Financing expected future shortfalls in entitlement trust funds solely through increased payroll taxes would likely exacerbate the problem of reductions in labor supply by diminishing the returns to work," he said.
"By contrast, policies promoting longer working life could ameliorate some of the potential demographic stresses."
The Fed chairman said the US is relatively better prepared than other industrialized countries to support an aging population. But Greenspan urged fiscal policymakers not to put the issue off any longer.
"Early initiatives to address the economic effects of baby-boom retirements could smooth the transition to a new balance between workers and retirees," Greenspan said.
"If we delay, the adjustments could be abrupt and painful," he warned.
Because Congress has been unable to curb benefits once put in place, any additional benefits should be created "only when their sustainability under the most adverse projections is virtually ensured," he said.
Greenspan noted that the US must remain receptive to immigrants to help the country adjust to the aging of the workforce.
He also said increasing productivity is a key to maintaining the ability to pay for retirement benefits.
"It is (the) heightened growth of output per worker that offers the greatest potential for boosting US gross domestic product to a level that would enable future retirees to maintain their expected standard of living without unduly burdening future workers," he said.