Alan Greenspan came in for a great deal of criticism following his remarks to Congress at the end of February about social security and deficits. Whether he deserves it or not depends largely on your political colours. But his testimony raises a fundamental issue about ageing populations – an issue that politicians, inside and outside the US, ought to be wrestling with now. In the US today, federal commitments to social security and Medicare programmes are less than 7% of GDP. This is predicted to rise to 12% by 2030. When spending on Medicaid is added in, this percentage will be even higher. These are large sums that will further strain a US budget already crashing back into deficit.
The start of this stress is just around the corner. The first baby boomers retire at the end of the decade. That is just two presidents away, possibly one if a Democrat wins this November. Yet nothing is being done, so it's left to Greenspan, an unelected official, to confront the issue.
It's his job to keep the economy on an even keel. So his suggestion in the question and answer session after his testimony that changing the rules for social security and Medicare might be preferable to raising taxes should be taken in that context: it's his job to worry about the effect of tax increases.