Greenspan's Con Job
by William Greider
The Nation magazine, March
It is not exactly that he lies, but Alan
Greenspan certainly ranks among the most duplicitous figures to
serve in modern American government. Using his exalted status
as economic wizard, the Federal Reserve chairman regularly corrupts
the political dialogue by sowing outrageously false impressions
among gullible ~ members of Congress and adoring financial reporters.
These distortions are not harmless; they become solemn writ for
lawmakers and opinion mongers. Greenspan is especially destructive
when he opines on public matters outside his supposed expertise
as a central banker. His thinking is still anchored by Ayn Rand's
brittle social philosophy: Let the strong prevail, let the weak
pay for their weakness.
The Fed chairman's recent remarks on Social
Security and the federal budget deficits offer a particularly
chilling example. In a House budget hearing, he elided the two
subjects in a way that produced predictable scare headlines and
chin-wagging editorials. The deficits must be dealt with promptly,
he warned, because the baby boomers are about to retire. Then
Social Security will be in trouble. And so government must cut
benefits now, before it's too late. "I am just basically
saying that we are overcommitted at this stage," he explained.
"You don't have the resources to do it all."
That sounds like manly wisdom. Greenspan
was widely praised for courage. He should more properly be pilloried
for gross mendacity. He is proposing a con job on ordinary working
Americans-a bait-and-switch game on a grand scale-in which the
payroll taxes they paid into Social Security over many years will
now be diverted to other purposes, including the generous tax
reductions G.W. Bush has enacted for the very wealthy and the
corporations. It doesn't sound so noble when you put it that way.
Greenspan knows these facts but also knows his big lie will probably
endure as conventional wisdom. Typically, the media shorthanded
his comments to create a larger fallacy-that Social Security is
part of the deficit problem, therefore future retirees deserve
to take the hit.
Here is the truth: Social Security is
not in deficit, not now and not for at least the next forty years.
The trust fund will have a surplus next year of $1.8 trillion.
In 2011 when, Greenspan warns, the baby boomers will start retiring
in large numbers, the surplus will be $3.2 trillion. These stored
savings, plus future payroll-tax revenue, are sufficient to pay
all retirees the current level of benefits through 2042, according
to the fund's very conservative actuaries.
The problem is, the government borrowed
this money and has spent it on other projects. But the trust fund,
despite what rightwingers like to claim, is not an accounting
gimmick. The government is legally obligated to pay back the money
(as surely as it is obliged to repay Treasury bonds). The borrowed
trillions, in fiduciary terms, belong to the "beneficial
owners"-every worker who has paid higher payroll taxes for
the past twenty years.
Greenspan is familiar with the accounting
because he was chairman of the bipartisan commission that supposedly
"fixed" the Social Security problem back in 1983 by
imposing a huge increase in FICA payroll taxes-extra revenue that
produced the still-growing surpluses. This historic tax shift
(I think of it as the "crime of '83") was most convenient
to the Reagan Administration because Reaganomics had just created
huge budget deficits by cutting income taxes for the monied interests
and pumping up the military budget. The burgeoning surpluses from
the Social Security payroll tax would help offset the economic
impact of the deficits. Hardly anyone noticed at the time, since
Democrats cooperated in the "solution." Now Bush Jr;
has done the same thing. And Greenspan is proposing another "fix":
Double-cross the workers who paid the extra trillions; don't disturb
the monster tax cuts delivered to the rich. Any con artist would
appreciate the . bait-and-switch as a nifty piece of work.
But the epic swindle may yet fail. Politicians,
even the rightwing variety, hesitate to close the deal for fear
the "marks"-workers, young and old-might figure it out.
Meanwhile, there's one simple and just solution for any long-term
fiscal problems Social Security might face: Eliminate the income
cap of $87,000 on FICA taxes so that every highly paid worker,
even Bill Gates, would pay the full freight. Since wealthy earners
have benefited disproportionately from tax reduction, this would
be their personal contribution to restoring fiscal order. Why
doesn't someone ask the Fed chairman about that? If Democrats
were more attentive to their constituencies, they would be aggressively
promoting this reasonable alternative to Greenspan's sordid double
talk, attacking him for duplicity and filing resolutions of impeachment.
Did the Federal Reserve chairman knowingly deceive Congress and
the public? What did the chairman know and when did he know it?
Let the hearings begin.
William Greider page