Alan Greenspan: This is 'extremely dangerous'

Greenspan: Extremely strong and growing labor market
Greenspan: Extremely strong and growing labor market   

While markets hone in on the Federal Reserve's monetary policy hints, former Fed Chairman Alan Greenspan sees a bigger economic irritant—government spending.

On Wednesday, Greenspan decried a rise in entitlement costs, which he contended have pressured the U.S. economy.

"To me the discussion today shouldn't even be on monetary policy it should be on how do we constrain this extraordinary rise in entitlements," he said in a CNBC "Closing Bell" interview, calling the trend "extremely dangerous."

Alan Greenspan, former Federal Reserve chairman
Adam Jeffery | CNBC
Alan Greenspan, former Federal Reserve chairman

Social expenditures in the U.S. were 19.2 percent of gross domestic product last year, up from 15.5 percent in 2005, according to data from the Organization for Economic Cooperation and Development.

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Still, the portion of GDP spent by the U.S. on social benefits last year was below the OECD average of 21.6 percent. The majority of member nations individually shelled out a higher percentage of GDP, as well.

Greenspan was the head of the U.S. central bank from 1987 to 2006. He declined to characterize the Fed's policy-making committee's assessment of the nation's economy after its most recent meeting Wednesday.

However, he noted that he sees a "strong and growing labor market" despite concerns about productivity growth.

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