This ought to be interesting...
Will Fed chief wade into Social Security debate?
Greenspan heads to Hill; investors look for hints on exit strategy
By Martin Wolk
Chief economics correspondent
MSNBC
Updated: 6:40 p.m. ET Feb. 15, 2005
With less than a year left in his term as Federal Reserve chief, is Alan Greenspan thinking about an exit strategy?
Investors, taxpayers and lawmakers will be looking for any hint of one when Greenspan troops to Capitol Hill Wednesday and Thursday to offer his semiannual report on the economy.
With the economy expanding steadily, Greenspan has little reason to veer from the Fed s program of gradually raising short-term rates to prevent inflation from gaining ground. But analysts said they will be looking for any hint of milestones that would allow the central bank to move to the sidelines.
Greenspan also is certain to face questions about his views on overhauling Social Security, the No. 1 item on President Bush's domestic agenda. Several analysts said they thought Greenspan would tread lightly after the kerfuffle over his suggestion last year that benefits eventually might have to be cut.
But one key senator said Tuesday that Greenspan is taking an active role in the debate. Sen. Lindsey Graham, R-S.C., who is writing a bill that would include private accounts to partly replace Social Security, said the Fed chief suggested a new way to calculate retirement benefits.
Lindsey said he met twice with Greenspan, who suggested protecting benefits for low-income workers, say those making $30,000 or less. But higher-income workers would be subject to a new form of inflation indexing that would cut their benefits over the long run.
"He s a real smart guy," Graham said of Greenspan. "He s been involved with entitlement reform ideas for years. ... He knows how my bill works because I explained it to him, and he said, Why don t you look at a progressive indexing system? And I think it s a very good idea.
Although Graham is a key player in the Social Security debate, he is not on the Senate Banking Committee that will hear from Greenspan Wednesday. Greenspan will appear before the House Financial Services Committee Thursday.
