fed chief warning on us deficit federal reserve chairman alan greenspan has warned that allowing huge us budget deficits to continue could have  severe  consequences.  speaking to the house budget committee he urged congress to take action to cut the deficit  such as increasing taxes. while the us economy is growing at a  reasonably good pace  he warned that budget concerns were clouding the economic outlook for the us. pension and healthcare costs posed the greatest risks to the economy  he said.  the government program faces severe financial strains in coming decades as the massive baby-boom generation retires.  i fear that we may have already committed more physical resources to the baby-boom generation in its retirement years than our economy has the capacity to deliver. if existing promises need to be changed  those changes should be made sooner rather than later   mr greenspan said. he also warned that unless the nation sees unprecedented rises in productivity  retirement and health programmes would need  significant  changes. he called on congress to cut promised benefits for retirees  as the promised benefits for the soon-to-retire baby boom generation were much larger than the government could afford.  meanwhile any move to narrow the deficit gap by raising taxes could pose a significant risk to the economy by dampening growth and spending  he added. he also urged congress to reinstate lapsed rules that require tax cuts and spending to be offset elsewhere in the budget in an effort to prevent the us heading further into the red. despite the dire warnings  mr greenspan did offer some good news for the short term. as us growth gathers steam and incomes rise that should lead to a narrowing of the deficit. recent increases in defence and homeland security spending were also not expected to continue indefinitely  which should cut some costs. since president george w bush came to office the federal budget has swung from a record surplus to a record deficit of $412bn last year.