Wednesday, February 16, 2005
Alan Greenspan's long and strange affair with Social Security
My third ever post to MSS discussed how Alan Greenspan, while arguably a monetary policy savant, was a best a fiscal policy dunce. His advice to cut taxes in 2001 to avoid "paying off the whole national debt" failed the laugh test when he said it, and failed the reality test in short order.
But as Paul Krugman pointed out, Greenspan may be worse than dumb on fiscal policy---he may be giving misleading advice in order to rip off the middle class and shrink the government. Greenspan helped set up the 1983 pact to improve Social Security's long-term financial position by raising payroll taxes and creating a trust fund. The deal to the middle class, enunciated in plain language by none other than Ronald Reagan, was that there was an "iron-clad" commitment to keep Social Security around forever. You pay your dues, and you get to guaranteed basic retirement benefits. Then, in 2001, Greenspan effectively sold out the middle class, sending the money needed to keep his and Reagan's committment back into the pockets of the rich. The choice, as Al Gore kept pointing out, was between a Social Security "lock box", and a tax cut spree. Greenspan showed *zero* concern for the long-run fiscal position of SS in 2001.
Tax cuts created an unnecessary fiscal crisis in the general fund which now gives Greenspan and Bush cover to cluck about the need for cutbacks in benefits. All those middle class taxpayers, who diligently did their part in the 1980s and 1990s, are being played for chumps.
One might almost think that Greenspan has always hope to gut Social Security, in pursuit of a smaller state. As a Century Foundation report notes, we don't have to speculate---we can read Alan's lips.
But as Paul Krugman pointed out, Greenspan may be worse than dumb on fiscal policy---he may be giving misleading advice in order to rip off the middle class and shrink the government. Greenspan helped set up the 1983 pact to improve Social Security's long-term financial position by raising payroll taxes and creating a trust fund. The deal to the middle class, enunciated in plain language by none other than Ronald Reagan, was that there was an "iron-clad" commitment to keep Social Security around forever. You pay your dues, and you get to guaranteed basic retirement benefits. Then, in 2001, Greenspan effectively sold out the middle class, sending the money needed to keep his and Reagan's committment back into the pockets of the rich. The choice, as Al Gore kept pointing out, was between a Social Security "lock box", and a tax cut spree. Greenspan showed *zero* concern for the long-run fiscal position of SS in 2001.
Tax cuts created an unnecessary fiscal crisis in the general fund which now gives Greenspan and Bush cover to cluck about the need for cutbacks in benefits. All those middle class taxpayers, who diligently did their part in the 1980s and 1990s, are being played for chumps.
One might almost think that Greenspan has always hope to gut Social Security, in pursuit of a smaller state. As a Century Foundation report notes, we don't have to speculate---we can read Alan's lips.
