The rising US budget deficit is a major threat to the country’s economic growth, Federal Reserve chairman, Alan Greenspan, has warned. The central bank chief was speaking to a special US congressional committee on aging.
Addressing members of the upper house of Congress, the Senate, he called for a swift review of commitments to the increasing number of retired people in the US.
He said that the US government’s budget was “on an unsustainable path” and that “at some point these deficits will cause the economy to stagnate or worse.”
Greenspan stressed measures need to be taken now to finance future benefit commitments.
With tax cuts and the cost of the Iraq war, George W Bush has presided over an ever deepening budget deficit.
It is forecast to be 427 billion dollars for this year, that is around 320 billion euros.
Greenspan said the looming retirement of 78 million baby boomers will put a huge strain on the retirement programme.
He also called for restraint in the programmes that provide medical care for the poorest Americans as well as pensioners.
He cautioned that closing the gap solely with rising taxes could also “severely inhibit economic growth.”