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Greenspan Urges Cuts in Future Social Security Benefit

Aired February 25, 2004 - 12:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WOLF BLITZER, CNN ANCHOR: Let's begin here in Washington, where Federal Reserve Chairman Alan Greenspan is now urging Congress to deal with a record-high budget deficit by cutting -- yes, cutting -- future Social Security benefits. Potentially a move that could affect a lot of baby boomers and older Americans.
CNN's Joe Johns is joining us now live from Capitol Hill with the latest developments.

It's pretty much of a bombshell, as I said, Joe.

JOE JOHNS, CNN CONGRESSIONAL CORRESPONDENT: Wolf, Alan Greenspan sounding an alarm today, issuing what amounts to a warning before the House Budget Committee. The headline, that federal deficits and retirement of the baby boom generation will require future cuts in Social Security and Medicare, which he said is preferable to tax increases. He also said cuts to these entitlements should be long term so that current retirees can be protected.

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ALAN GREENSPAN, FEDERAL RESERVE CHAIRMAN: The dimension of the challenge is enormous, but history has shown that when faced with major challenges, elected officials have risen to the occasion.

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JOHNS: Greenspan said cutting spending would be preferable to raising taxes because, in his view, raising taxes could hurt the economic growth.

Wolf, back to you.

BLITZER: And if you read carefully his statement, which I read, the Federal Reserve chairman, Alan Greenspan, he's saying it may be necessary to increase the age, when people are eligible for Social Security, Medicare benefits, from 65 to 67. Reduce some of those benefits, unless major action is taken right now in dealing with this $500 billion annual budget deficit. Any immediate reaction on Capitol Hill from what the chairman said?

JOHNS: Not immediately, Wolf. However, as you know, this could be quite a bombshell here on Capitol Hill during an election year.

BLITZER: All right. Joe Johns, we'll continue to monitor the story up on Capitol Hill. Let's move over to the White House, though. President Bush commenting directly on Chairman Greenspan's remarks during a photo opportunity just a little while ago. If you were watching CNN, you saw it live here. He was meeting with the President of Georgia, Mikhail Saakashvili. The President met with President Saakashvili in the Oval Office.

Let's bring in Kathleen Koch. She's joining us now live from the White House.

Kathleen, the President was asked about the comments from Chairman Greenspan.

KATHLEEN KOCH, CNN CORRESPONDENT: And, yes, Wolf, the President said that he had not seen these remarks by Chairman Greenspan. So perhaps blindsided by this bombshell, as you described it, that the chairman dropped there on Capitol Hill today. The President only said that it was his belief, though, that the best way to keep his promise to cut this huge budget deficit in half within five years, a promise that he has made, the best way to do that, though, is to stick to his economic plan.

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GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The best way to trim the deficit is to follow the budgetary plan that I submitted to the United States Congress. We presented a plan that would cut the deficit in half over the next five years.

I haven't talked to the chairman nor read his comments. I need to see exactly what he said. My position on Social Security benefits is this: that those benefits should not be changed for people at or near retirement. As you know...

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KOCH: And just as Joe Johns said, President Bush is, just as Congress, very much loath to talk about and certainly does not support cutting benefits of any Social Security recipients, current one or in the near future, discussing that kind of thing in an election year. It's just simply a political hot potato. The President did in his remarks make a case for one proposal of his, and that is to allow Social Security recipients to invest part of their benefits in a personal savings account, and thereby ensure that they will be there when they need the benefits -- Wolf.

BLITZER: Kathleen, there's no doubt that Democrats, including the Democratic presidential hopefuls, are quickly going to jump on what Chairman Greenspan said, blaming the President, his three years in office, for these huge budget deficits, using this as a political hot potato. I assume White House officials are gearing up to deal with that criticism.

KOCH: Certainly. The President has already been defending his economic record on the road, making the point that he believes that the recession actually began back during President Clinton's presidency, and it was the combined effects of the recession, the 9/11 terrorist attacks, and also malfeasance on the part of CEOs in corporate America. He believes that all those things contributed to the huge deficit and does not shoulder the blame himself.

BLITZER: CNN's Kathleen Koch at the White House.

Kathleen, thank you very much.

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