Alan Greenspan today said consumer spending and housing starts have helped the economy pick up, which portends well for a lower federal budget deficit in the near term. However, the prospects for the federal budget over the longer term "remain troubling," the Federal Reserve chairman testified before the House Budget Committee. Although the financial markets have not yet reacted to deficit concerns and interest rates remain low, "these developments ... do not warrant complacency about the fiscal outlook," he said. "With the baby boomers starting to retire in a few years and health spending continuing to soar, our budget position will almost surely deteriorate substantially in coming years if current policies remain in place."
Among the policies Mr. Greenspan said needed evaluation are Social Security benefit promises that the nation might be unable to keep. "It is imperative that we make clear what real resources will be available so that our citizens can properly plan their retirements," he said.