February 26, 2004
Greenspan Speak
Alan Greenspan, Chairman of the Federal Reserve Banking System, dropped a time bomb in the Republican’s laps. Greenspan is appointed and retains his position at the discretion of the President and answers regularly to the Congress. So, Greenspan is never going to come out and say his boss is missing the boat, or the Congress is cheating Americans now paying into the Social Security. At least he would never say so overtly.
He did however; bring the issue of Social Security insolvency in 30 years or more down the road, into focus for the November elections. He did this quite effectively by linking Social Security problems to the deficits which this President and Republican Congress are responsible for. Specifically, Chairman Greenspan said according to Ken Moritsugu of Knight Ridder:
"I think it is terribly important to make certain that we communicate to the people who are about to retire what it is they're going to have to live with. And if we promise more than we can actually deliver, I think it will be a major blot on our whole fiscal process," Greenspan said.The looming Social Security and Medicare crisis makes it all the more important to get today's growing federal budget deficit under control, Greenspan said. He described today's situation as "probably one of the most difficult fiscal situations we've ever faced."
Now Chairman Greenspan is not about to attack President Bush's tax cuts, that could get him fired. So if revoking any of the tax cuts is off the table, cutting spending is the only option left. And with a half trillion more dollars being spent in 2005 than are taken in by tax revenues, it is clear the President and Congress are not dealing with the problem at all. In fact, Congress and the President are using about 120 billion dollars of Social Security income to help keep the deficit numbers lower than they actually are.
Remember when all the politicians were talking, promising and debating the Social Security lock box? For all the talk, it never happened. And this Republican Congress is consuming Soc. Sec. income for pork projects and their own pay raise while managing even still, to spend more than 1/3 trillion dollars more than they are taking in. Chairman Greenspan is quite correctly bringing to the public attention, the fact that uncontrolled and unpaid for spending by this President and this Republican Congress is going to result in a breach of contract with the American tax payer with regard to Social Security. In other words, this President and Congress are killing the Social Security program and should be held accountable.
Such government spending also threatens future borrowing ability by the U.S. Government. Yes, the U.S. has a credit rating too, just like credit card users. While American credit is fine today, continuing to add interest on the debt, to the debt, and spending more than the government takes in, for years on end, will bankrupt the U.S. just as it would an undisciplined credit card user.
Cutting government spending is one approach. Raising tax revenues is another. Either or both of these solutions applied together will solve the future bankruptcy of the U.S. What Chairman Greenspan is pointing out in his own inimicable way is that this Congress and this President are doing NOTHING to deal with the problem. They are acting like thieves with stolen credit cards, spending with abandon because they know they will not have to pay the bill.
The American people owe Chairman Greenspan a vote of thanks for making this all important issue to Americans, an issue to be raised in the November elections. It takes courage to challenge the boss, even if you are Alan Greenspan. Thank you sir.
With people like Greenspan and the IMF criticizing the administration so stridently, how can this election be anything but a loss for the administration? I would expect a significant portion (even if that is only 1%) of Bush’s voter base to cease their support on the grounds of fiscal conservativeness. That could prove decisive.
Posted by: Gaelen Burns at February 26, 2004 12:51 PMI try to never underestimate the selfishness and blinding spirit of self-destructive individualism of the American people, the leaves communal responsibility in the cold to die on the vine. It is this sprit that led to so many people to vote for Bush in 2000, and it is what will make the 2004 contest a close one, and quite possibly return one of America’s worst Presidents to office to continue the fleecing of the American people.
As for Greenpsan; I respect his opinion, but I think it is wrongheaded to lower SSN benefits; the tax cuts should be halted and a way found to bring American jobs back to the U.S. and stem the tide of their departure. The American government needs to partner with American business to help shoulder the burden of Health Care, probably the largest expense for businesses after payroll. This along with prescription drug cost control would go a long way toward keeping American jobs in America. Am I wrong in this line of thought?
This is also a Libertarian stance, self reliance with minimal government intrusion: Securing Your Retirement.
I’m glad Greenspan is coming out against this broken social program.
Posted by: SoL at February 26, 2004 01:15 PMAlso David, the President cannot fire Greenspan, he is appointed by the Federal Reserve Board. The Federal Reserve is also not a part of the government, it is a private bank, but that’s a whole ‘nother ball of wax that we could debate.
Posted by: SoL at February 26, 2004 01:18 PMMr. Martin, can you think of a better way to get this issue onto front page headlines in an election year than proscribing a cut in S.S. benefits?
This is “Greenspan speak”. Greenspan also said the government should not breach its contract with tax payers, for if it does, faith and credit in the U.S. government and its money management will be damaged creating enormous economic burdens on American taxpayers.
In my opinion, this has to be the shrewdest and most perfectly contrived political move on the election chessboard I have ever witnessed. I think it is safe to say, Greenspan sides with taxpayer and retirees, not with Congress and his Bossman.
SoL, what resource are you using. I pulled the following off the Fed’s web site:
If the President hires him, the President can fire him.
1. Appointment and Qualification of Members
The Board of Governors of the Federal Reserve System (hereinafter referred to as the “Board”) shall be composed of seven members, to be appointed by the President, by and with the advice and consent of the Senate, after the date of enactment of the Banking Act of 1935, for terms of fourteen years except as hereinafter provided, but each appointive member of the Federal Reserve Board in office on such date shall continue to serve as a member of the Board until February 1, 1936, and the Secretary of the Treasury and the Comptroller of the Currency shall continue to serve as members of the Board until February 1, 1936. In selecting the members of the Board, not more than one of whom shall be selected from any one Federal Reserve district, the President shall have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country. The members of the Board shall devote their entire time to the business of the Board and shall each receive an annual salary of $15,000, payable monthly, together with actual necessary traveling expenses.
[12 USC 241. As amended by acts of June 3, 1922 (42 Stat. 620); Aug. 23, 1935 (49 Stat. 704). Prior to the enactment of the Banking Act of 1935, approved Aug. 23, 1935, the Board of Governors of the Federal Reserve System was known as the Federal Reserve Board. See note to the third paragraph of section 1. The portion of this paragraph dealing with salaries of Board members has in effect been amended numerous times, most recently by Executive Order. Prior to the act of December 27, 2000, section 1002 of which revised the executive schedule, the salary of the chairman of the Board was set at executive schedule level 2 and the salary of other members at level 3. The salary of the chairman of the Board is now set at executive schedule level I, and the salary of other members at level II (see 2 USC 358 and 5 USC 5313 and 5314).]
Posted by: David R. Remer at February 26, 2004 01:30 PMThis is what happends when you give a “retirement insurance” fund to the federal government- they dont save your money for you in a smart way, they use it when they need it to because there is no short term accountability for long term damage. We need to get the government out of this social security, medicare ect mess AS SOON AS POSSIBLE. We are making all of our fiscal policy today in the shadow of the terrible problems that social security will cause us. Our paternalism is catching up wiht us, and its not going to be pretty. Now you see the real price of the so-called “humane” social engineering experiments by the federal government.
Posted by: Misha Tseytlin at February 26, 2004 01:53 PMThis isn’t the price of a humane society. This is a result of mismanagement. Bush has made a complete balls of this. Plenty of countires manage to provide their citizens with the benefit of social security without bankrupting the nation.
If you want to enjoy the benefits of a healthy happy society, there is a price to be paid. Providing social security for the less well-off is unfortunatley one of them. As is providing some healthcare. And while I am at it, I am not sure if executing handicapped people or lots of poor people is such a good idea either.
If people don’t have a stake in society, or are never allowed the opportunity to enjoy some of it’s benefits, then they’ll pull it down around all of us.
Posted by: Bob Hope at February 26, 2004 02:48 PMthe problem is our nation allows in more immigrants than the rest of the world combined (which is a great thing by the way- and something we should all be proud of), so we cant afford to have the same sort of social security systems they do. those other nations can sustain their socialist-light policies because they impose strong xenophobic limitations (i am looking at you, mainland Europe), thankfully we are not like that.
Yes, I agree that if we adopted a Chile-like retirement system, we could manage retirement planning without getting into these sorts of problems- but the Dems are so deadset against anything that resembles individual retirment accounts that this possibility is not realitic.
Also, social security HURTS the poor more than anyone else- the rich can afford to retire whether teh government screws up the retirement system or not. it is the poor, who lose 12% of their income to social security, who are getting most screwed and who will get even more screwed once this system goes bankrupt.
Finally, to blame bush for messing up social security is like blamming the coach of an 0-14 NFL team for them losing game 15, if you get my drift.
Posted by: Misha Tseytlin at February 26, 2004 05:55 PMI think this might actually help the GOP get re-elected. Nader will say what American workers want to hear while Kerry will say the same old political crap about SS and Nader will gain a bigger share of the votes cast. Mabye that’s the plan. Either way it ends Greenspan’s carreer. Maybe it’s his last hurrah. Also we don’t all work in heated and air conditioned offices. I am very healthy but even at 57 years old I am having a hard time with the strength and dexteriory I need to do my industrial electrician job. You can’t just raise retirement ages willy nilly without considering the type of jobs that are out there.
Posted by: JJ at February 26, 2004 05:57 PMJJ- wouldnt i have been nice if the government had let you invest your hard-earned money in a personal retirement account so that you could retire when you wanted instead of when the government said you could? (you see your paycheck every week, i dont need to tell you that a big chunk of it every month for your entire working life had been taken and put into social security)
Posted by: Misha Tseytlin at February 26, 2004 06:14 PMMisha, I don’t want to trade in a Soc. Sec. plan with a contractual guarantee by the U.S. government for a market based plan that could get plundered the week before I retire. Neither do millions and millions of senior and us AARP folks. So you vote your way, we’ll vote ours to protect the contract we made with our premiums as consideration. I also have an IRA, if they gets ripped off, or lost in the markets, it is a great comfort to know Soc.Sec. will be there to assist me with at least a chance of surviving that lifetime that comes after the market place has turned us older workers out to pasture.
And by God we will hold Bush and this Congress accountable just as we held Clinton and that Congress accountable for insuring S.S. remains a top priority, over foreign invasions, over pork barrel spending, over colonies on Mars and the Moon, over star wars technology. My generation is not entirely selfish, we want to see education, homeland defense, and lowered health care costs made a priority as well.
First, I think people idolize Greenspan too much. People slavishly hang on his every word as if he was the second coming of Adam Smith. But he’s been wrong, and if he keeps up the horsecrap with the interest rates he’s doing, It’s going to backfire seriously.
Another thing, something I don’t think many people realize: Greenspan is an Objectivist, a follower of that philosophy who learned it from Ayn Rand herself. For those not familiar, objectivism is that nice cosy philosophy about how the best things come from everybody being selfish (not merely self interested.)
For all that, I’ll agree the excessive spending is creating it’s share of problems. But did we need the high priest to tell us this? Economists have been saying this since Bush started maxing out the credit cards with that insane little gleam in his eyes.
Posted by: Stephen Daugherty at February 26, 2004 07:55 PMGreenspan’s words will be in AARP’s next issue and reach millions and millions of Americans. Greenspan made the issue front page. Whatever his motives, we seniors and workers hoping to see a safety net for our old age, owe Greenspan a big vote of thanks for making this one of the major hot potatoes in the ballot box, along with jobs, and Iraq’s WMD.
Posted by: David R. Remer at February 26, 2004 11:42 PMRead “The Price of Loyalty,” the story of Treasury Secretary Paul O’Neill’s stay in the Bush administration. O’Neill and Greenspan were both staunch supporters of using the surplus that existed when Bush came in to fund Social Security for those who had paid in all these years until a new system incorporating private investment could be implemented. Bush blew that idea off, along with the surpluses.
Posted by: Jim Hopkins at February 27, 2004 09:28 AMActually, I do blame Coach Bush for losing game 15. And game 16, 17, 18, and 19. The reason is simple. Had Coach Bush won game 15 who would be stepping up to the plate to take the credit? If our economy had been producing jobs instead of deficits who would be the first person in line to bask in the sunshine of success? If we must play the blame game we must realize that it is a pretty easy game to play. Just ask yourself who would be taking the credit had things gone well and you know who to blame when things don’t.
Posted by: William Flynn at February 28, 2004 11:07 AMWell, It seems time to eliminate the social security tax cap. It’s fair. Social security needs to stay in place. For all the hard working Americans who depend on our payroll taxes to work for us and be there when we retire, we must keep it and build it stronger for the future. I can’t see all these hard working, common sense people depending on a market based privitized retirement plan. It’s time for the wealthy to pay their share. Average Americans don’t get a raise like the wealthy get when the limit is reached. The old saying “The rich get richer and the poor get poorer” is extremely true right now. Where are the morals and ethics of these wealthy people-expecially these politicans-who want to keep their high and mighty selfish interests to themselves. I don’t believe our fore fathers or President Franklin D. Roosevelt ever had in mind what our government is doing to the working class people of America. America is great and we should be proud, but I am very ashamed. How greedy can you get when honest people just want their fair share for what they’ve worked for.
Posted by: C. Scott at March 25, 2004 09:51 PM
