While agreeing in essence with President Bush's plan to privatize Social Security, Federal Reserve Chairman Alan Greenspan said that change to the 70-year-old program must come gradually. "If you're going to move to private accounts, which I approve of, I think you have to do it in a cautious, gradual way," Greenspan said in remarks before the Senate Banking Committee. Greenspan concurred with the assessment that the problems with Social Security should be addressed sooner rather than later. including the possibility of raising payroll taxes to help offset transition costs. "Beyond the near term, benefits promised to a burgeoning retirement-age population under mandatory entitlement programs, most notably Social Security and Medicare, threaten to strain the resources of the working-age population in the years ahead," Greenspan said. "Real progress on these issues will unavoidably entail many difficult choices. But the demographics are inexorable, and call for action before the leading edge of Baby Boomer retirement becomes evident in 2008." The chairman also said that the economy is sound, with inflation in check, and indicated that the Fed would continue raising short-term interest rates. But he advised that it is ""imperative to restore fiscal discipline," referring to the record budget deficit.

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