July 22, 2004

Washington (AP) -- Federal Reserve Chairman Alan Greenspan said Wednesday that Congress has lost the ability to manage crucial long-term budget issues and new mechanisms are needed to keep future costs from ballooning beyond the nation's ability to pay.

Greenspan warned that rising deficits could become a problem over the next decade as Social Security and Medicare costs escalate with the retirement of baby boomers.

Greenspan again supported a return to pay-as-you go policies that would require Congress to offset future increases in government spending or new tax cuts with cuts in other government programs or tax increases.

A decade-long requirement for pay-as-you-go budgeting expired in 2002.

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