Former Federal Reserve Chairman Alan Greenspan says there is no credible way to control the government's debt without inflicting pain on the economy.
He also said economic growth is likely to be slow for years, increasing pressure on Congress to cut entitlement spending.
“There is no credible scenario of addressing our current fiscal problems without inflicting economic pain,” Greenspan told members of a Senate Finance Committee on Tuesday, adding that the country has waited too long to address its problems.
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In prepared remarks, he said an overhaul of the tax code must be part of any effort to solve the country's budget problem.
Greenspan called for reforms to the Medicare health program for the elderly and the Social Security retirement pension program.
"We have been procrastinating far too long in coming to grips with the retirement of the baby-boomer generation, a fiscal problem that has been visible for decades," he said.
Greenspan expressed support for a deficit-cutting plan written earlier this year by House Budget Committee Chairman Paul Ryan, R-Wis., which Democrats have attacked for revamping the Medicare healthcare program for seniors.
Of the alternatives, Greenspan said he prefers the proposal from the Simpson-Bowles deficit-cutting commission, which deals with tax breaks as well as spending cuts.
"Tax reform is a major part of any fiscal reform. It will contribute to a restoration of American competitiveness and the vibrant economy that goes with it," he told a Senate panel. "What impressed me most of Bowles-Simpson is that it addresses tax expenditures," Greenspan said.
Meanwhile, tax expenditures — otherwise known as loopholes and subsidies — should be targeted for reform, he said.
Democratic Senator Bill Nelson, chairing the hearing, agreed. "A launching point for getting our fiscal house in order should be an overhaul of the federal income tax," he said.
Criticized widely for mistakes when he was the nation's top central banker, Greenspan isn't nearly the economic hero he once was, but his counsel is still sought on Capitol Hill, and it was gloomy at a Senate Finance subcommittee hearing.
Greenspan spoke as President Barack Obama and Congress begin an autumn of dueling over job creation and deficit reduction.
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