As lawmakers continued to kick around the political football that Social Security reform is quickly becoming, Federal Reserve Chairman Alan Greenspan reiterated his support late last week for President Bush's plan to establish private accounts.

But Greenspan offered this new caveat: act with deliberation.

Bush's No. 1 solution to an impending Social Security shortfall is to send 4% of worker earnings into private accounts, most likely a mix of stock and bond funds. Opponents of the plan argue that it's too costly, too risky and that the only party to benefit would be Wall Street from the fees it would charge on thousands of accounts.

In recent weeks, several major investment firms and brokerage houses, such as Waddell & Reed and Edward Jones, have stepped back from the issue because of the mounting political debate.

Greenspan, however, told the Council on Foreign Relations in New York last Thurday that private accounts and perhaps even benefit cuts will be necessary to meet looming funding problems with the 75-year-old pension. He also warned that massive government borrowing to fund the changeover--opponents such as the AARP argue that it could cost upwards of $2 trillion to make the private accounts system happen--could serve to escalate interest rates.

"What we know for sure, however, is that the 30 million Baby Boomers who will reach 65 years of age over the next quarter-century are going to place enormous pressures on the ability of our economy to supply the real benefits promised to retirees under current law," Greenspan said.

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