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Greenspan: Social Security in Trouble

Federal Reserve (search) Chairman Alan Greenspan (search) said on Thursday the U.S. Social Security retirement program is in serious trouble, but avoided saying it was in "crisis" — as President Bush has charged.

In response to a question from the House of Representatives Financial Services Committee about why the Social Security (search) system was in crisis, Greenspan began to answer: "The crisis today is largely because..."

But a congressman interrupted to ask: "You agree with the president it is a crisis, today?"

Greenspan then rephrased his reply.

"The word crisis depends on in what terms. That we have a very serious problem with the existing structure is what I would stipulate. The terms of how you describe it are far less important than defining what it is," he said.

He also stood by his support for the president's tax cuts and said he supported the elimination of double taxation on dividends (search), but said such tax cuts should be accompanied by "pay as you go" rules to limit spending.

"I stipulated my support (for tax cuts) was in the context of a PAYGO rule, which had been allowed to lapse at this point. So if I were voting — but I don't vote — I would have voted to take other actions to offset (the tax cuts), because I thought that that particular form of tax cut was important," Greenspan said

"I still support the elimination, the partial elimination on double taxation of dividends, but I do it in the context of a full PAYGO system," he said.

Until 2002, Congress had in place pay-as-you-go budget rules that required all new spending proposals to be paid for with either tax increases or other spending cuts. But lawmakers allowed the so-called PAYGO rules to expire three years ago.