In testimony before the Senate Budget Committee, Greenspan also repeated his criticism of one element of Clinton's plan, having the government investment around $700 billion of Social Security money in the stock market.

"Even with Herculean efforts," Greenspan said, he doubted decisions on investing this money could be insulated from political pressures.

On the politically sensitive issue of benefit cuts or tax increases, Greenspan said the demographics of a huge baby boom generation retiring and fewer workers left to support retirees present policy-makers with few choices.

"In all likelihood, these taxes will have to be raised, or benefits cut, given that the system as a whole is still significantly underfunded," Greenspan said.

On that point, White House press secretary Joe Lockhart said, "We could not agree with him more on the fact that we need to do more. The president has made clear that he needs to work with Congress in order to reform. In addition to reserving the surplus and paying down the debt, we need to do more to reform the system. And we look forward to having that debate with Congress."

Last week in his State of the Union message, Clinton put forward a major proposal that would reserve about 60 percent of the government's projected budget surpluses over the next 15 years, an estimated $4.4 trillion, for shoring up the Social Security system.

Clinton said changes to Social Security will also likely needed, but has not said what they should be. The president said he believes deep benefit cuts or increases in the payroll tax rate will not be necessary, however. Republican leaders in Congress have also said they want to avoid increasing taxes or reducing retirees' standard of living.

Greenspan in his prepared testimony made no comments about current economic conditions. The central bank cut interest rates three times last fall to keep the U.S. economy from being dragged into recession by the global financial crisis. But most analysts expect no further rate cuts unless global financial conditions once again threaten to destabilize the U.S. economy.

Greenspan's views carry great weight on Capitol Hill, given what most politicians believe has been his exceptional direction of monetary policy during the current lengthy period of prosperity.

He is also considered a top authority on Social Security. He chaired the blue-ribbon commission that recommended the last major changes to the government's giant benefits program in 1982.

Greenspan praised the main thrust of Clinton's initiative, to pay down the national debt, but he said a section of the Clinton's program that would directly invest about $700 billion in the stock market was flawed.

The administration has argued that decisions on where to invest this money would be made by an independent board insulated from political pressures. But Greenspan said he doubted this approach would work because the large sums of money being talked about would inevitable lead to pressures from elected officials to have a say in how that money was being used.

And political decisions on such investments would make the economy less efficient and ultimately lower Americans' standard of living, the central banker argues.

Greenspan did praise Clinton's proposal to reserve the bulk of coming budget surpluses for shoring up Social Security, calling it a "major step in the right direction" because it would boost America's low national savings rate. But he warned that the $4.4 trillion in surpluses being projected over the next 15 years are based on uncertain economic forecasts and might well fall short of those projections.

Greenspan said that raising taxes to bolster Social Security may "prove too burdensome" given that the government's second biggest social program, Medicare benefits for the elderly, will also need bolstering.

The Fed chairman did not express a preference for how benefits could be cut, but he did note several choices — raising the retirement age, reducing payments or lowering the annual cost-of-living adjustments.

"Considerations such as these should not be taken off the table," Greenspan said.