Alan Greenspan today told members of the Senate Banking, Housing and Urban Affairs Committee that lawmakers should act soon to shore up Social Security and Medicare. He also said that failure to address those issues soon could affect long-term Treasury debt, the value of which is linked to future expectations about economic and population trends.
"The demographics are inexorable and call for action before the leading edge of baby boomer retirement becomes evident in 2008," the Federal Reserve chairman said in his semi-annual testimony on monetary policy to lawmakers.
He also testified that the economy is on steady course, and the Fed will continue to tighten short-term interest rates, which it began doing last June. "The evidence broadly supports the view that economic fundamentals have steadied," he testified, noting that consumer spending has been "well maintained" in recent months, and "business executives have become somewhat more optimistic" recently.