Thursday, February 17, 2005

Alan Greenspan, Villain

For years, it has seemed to me that Alan Greenspan was a sober and competent pilot for the US economy, managing to keep economic growth bubbling along without threatening the inflation of the 60s and 70s. However, in recent years, it has gradually become clear to me that he is willing to use the soapbox of his office to promote Republican and big business interests at the expense of the interests of the working class.

Social Security is the biggest example. To quote Kevin Drum:
In 1983, at a time when Social Security was genuinely facing a crisis - it was mere months away from failing at the time - a commission appointed by President Reagan and headed by Alan Greenspan proposed a series of fixes. Among other things, the Greenspan commission recommended increasing payroll taxes.

But there was a twist: Knowing that the baby boomers would begin retiring around 2010, Mr. Greenspan recommended raising payroll taxes by much more than was needed to pay benefits at the time. The surplus would be used to buy Treasury bonds, which could be redeemed when the boomers retired and payroll taxes were no longer sufficient to fully fund retirement benefits.
So the deal was that in the period from 1983 to about 2018, workers would pay more in Social Security payroll taxes in order to make Social Security solvent in the years 2018 to approximately 2040. But what actually happened to this extra money? The surplus money was squandered on Bush's tax cuts benefiting mostly the wealthy. What did Greenspan say about this? He supported them:
Greenspan made it abundantly clear, as he has in the past, that there is no contest in deciding between the two: tax cuts unquestionably are superior to spending increases. "If long-term fiscal stability is the criterion," he told the senators, "it is far better, in my judgment, that the surpluses be lowered by tax reductions than by spending increases."
In other words, Greenspan endorsed Bush's fiscal recklessness which turned surpluses into deficits without even the benefit of increased government services. This strategy has amounted to giving away the Social Security surplus to the rich.

Most recently Greenspan has endorsed Bush's private accounts idea, in the spite of the fact that he knows that it is a fiscal disaster in the making
Federal Reserve chairman Alan Greenspan's testimony before the senate banking committee undermined virtually all of the Bush administration's arguments for diverting some social security tax payments to fund private retirement accounts.

If the hole left in social security finances by the diversion were filled by added government borrowing, as proposed by President George W Bush, creating the private accounts would not add to national saving. For Greenspan, that is the overriding long-term retirement issue facing the nation.
Others blasting Greenspan recently include Matthew Yglesias, in the American Prospect and Kevin Drum in the Washington Monthly and Max Sawicky of MaxSpeak.


Blogger Kyle McCullough said...

And let's not forget that in 2000 he continued to raise interest rates--despite a weakening economy and refused to raise margin requirements--despite an obviously overheated stock market. I knew at the time that these actions would seriously hurt Al Gore's chances of election, and I never had any doubt that Greenspan knew that too.

That his actions (and inaction, in the case of margins) would hurt the economy--hurt America--was obvious, and obviously a price he was willing to pay.

Villain, villain most foul!

2:53 PM  

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