Greenspan on Social Security

And let me clarify that I am not saying privatization is the only option. What I am saying is that all the options need to be discussed or we will have a huge problem on our hands.

 

Moon, I really think your 95% of economists are wrong. Can you provide some proof of this? I think your own bias is showing there.

In addition any idiot can play with compound interest tables and come up with big numbers by just changing a few numbers. A small change to the 75th power is a huge number.

The proponents want to compare apples and oranges. They want to compare S and P returns, which have volatility with the complete safety of a program backed up by the faith of the Federal Government. It is like saying stocks are always better for all investors at all times than t- bills.


It is tough to get a neutral discussion when you have so much money pushing the privitization route. It also fits in with the anti-government agenda of the conservatives. Their policies benefit primarily the rich and that is one of the reasons why they want to do away with social security. The rich feel they don't need it. I also think they are very resentful that it pays proportionately more to the small wage earner the high wage earner.

Changes have been made througout the years in the social security system. We're having changes phased in now that are raising the standard age 67 instead of 65. It is changes on this order that need to be made.

Bush deliberately gave away the trillions in tax cuts because he was afraid of proposals to prop up the sytem with the money he wanted to rebate to the rich. If we can bail out the savings and loans, the airlines, Chrysler and other entitites why not inject some money into the social security system?

Normally a sound retirement plan requires safe money as well as some exposure to the market. Think of the social security as your safe money. It is like cds. Everyone should be encouraged to put other more risky money in the market. Gore proposed having the government do more to encourage savings in his "Social Security Plus" plan, but this was not acceptable to those who want to destroy the system.

 

glynch, this is not my point of contention. I do not care about the final solution right now, just the agreement that we need to do something.

Once again, you are arguing against the privatization, which is not the point of my argument here. (I agree that it is foolish and quite risky to put all of your savings in the stock market.) We need to do something, perhaps increase immigration to boost the number of workers here, or encourage people to make more babies, something, anything! Look, I would love it if there was no problem and SS could last forever in its current state. It's just not going to happen. What we need to do is accept that we need a change and move forward now, not in 10 or 20 years.

 

The Bushies' Social Security plans relies on bad math.

http://slate.msn.com/id/2096337/

The Free-Lunch Bunch
The Bush team's secret plan to "reform" Social Security.
By Ron Suskind
Posted Friday, Feb. 27, 2004, at 4:27 PM PT


During the 2000 campaign, candidate George W. Bush seemed particularly confident about his ability to pay for Social Security reform. Despite independent estimates that creating the kind of "voluntarily" private accounts he envisioned could cost more than $1 trillion, Bush consistently took the position that he could reform Social Security for free, without undermining promises to baby boomers anticipating retirement over the next several decades.

Why was Bush so sure of himself? According to documents unearthed yesterday from the trove of 19,000 files given to me by former Treasury Secretary Paul O'Neill, and a bit of additional probing, candidate Bush and later President Bush believed in the "Lindsey Plan." These documents show us what the president thought about Social Security reform at the only moment over the past three years—the fall of 2001—when he was fully engaged with this issue.

Larry Lindsey, Bush's tutor on economics during the campaign and later chairman of the White House's National Economic Council, devised a scheme based on creative accounting principles. Essentially, it proposed that the government would issue substantial new debt to sustain old-style benefits. This debt would be serviced and paid down by confiscating revenues from the higher returns from those opting for new-style personal accounts.

For the first nine months of the administration, this was called the "free-lunch" plan—a painless way to convert to a blended, private-accounts model. Inside of the Treasury Department and the Council of Economic Advisers, however, officials were befuddled by it. Lindsey seemed to have never called upon analysts inside the Social Security Administration to run the traps on his idea. Treasury and CEA did—and the numbers didn't even come close to working out. But that didn't stop Lindsey, or the president, from believing in and promoting the "free-lunch" plan. These two memos on RonSuskind.com, which have never before been released, show what Bush and others in the White House were actually thinking about Social Security reform.

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This is the kind of stuff that I was talking about. Read the post below from www.billmon.org. Our society generates an enormous amount of wealth. We have the resources to feed, house, educate, and provide medical care for everyone, if we don't allow a few at the top to hoard.



If the Face Fits II

The New York Times David Cay Johnson gets it. And I mean really gets it:

DAVID CAY JOHNSTON, AUTHOR, "PERFECTLY LEGAL": Well, in 1983 Alan Greenspan persuaded the Democrats who were in charge of Congress to overtax us on Social Security, that is to collect taxes in advance rather than on pay as you go system. The promise was that we would use the excess taxes to pay off the federal debt which was then about a trillion dollars. We have now paid 1.8 trillion dollars in excess Social Security taxes. This year the government will collect -- if you make $50,000, about $7,500 from you. It only needs 5,000 to pay current benefits. That other $2,500 wasn't used to pay off the federal debt, which is now 7 trillion dollars, instead it is being used to finance tax cuts for the super rich.

LOU DOBBS: We're putting up a graph right now which goes to the -- to that issue. Precisely what you're talking about. Now, why in the world would FICA be limited at $87,000 of earnings, taxing -- taxation on $87,000? Why not carry that straightforwardly through for everyone at higher levels?

JOHNSTON: Well, it's limited to the 90 percent of wages in the country. And the theory is that that's as high a benefit as the government is going to pay. So your benefit caps out, that's why the tax stops. If we simply had a pay as you go tax and it stopped at that end, Lou, I don't think there would be an issue. Since we were told you have to pay in advance. Of course a tax paid in advance costs you a lot more than when you can defer off into the future. That you are going to pay in advance for the benefits.

And now that money has not been spent to pay off the debt. Now Mr. Greenspan says you are not going to get those benefits but we should not raise taxes on those that make millions of dollars a year. It seems to me what Senator Daniel Patrick Moynihan predicted in 1983 has come true. He said this was thievery and the middle class were going to have their pockets picked by the rich.

DOBBS: Indeed, with that analysis that is what is happening. And the middle class at this point, hardworking men and women in this country are no longer being surprised by some of the pressures, forces that are working against them. What is your best judgment for a solution?

JOHNSTON: Well, in the case of Social Security, if we were to go back to pay as you go, people making $50,000 a year would have $48 a week more in their pocket, particularly if we took it all out of the side paid by the worker. So we cut that in half, and the max instead being dollar for dollar by your employer, it would be two dollars to one dollar. People earning $50,000 would have $48 a week more in their pocket. They could choose whether to save that money or whether to spend that money. But it would be their money and their choice.

DOBBS: I'm sorry, go ahead.

JOHNSTON: It would also mean, however, that the federal government would either be spending vastly more than it is taking in, a couple hundred billion dollars a year. We would either have to deal with that or raise taxes on people who have higher incomes.

DOBBS: Let's put the graph up. We have a graphic of this from your book that we want to show you maxing Social Security taxes per person doing exactly what David suggested. This is a remarkable -- to look at the income growth from 1970 to 2000, for the bottom, if you will, 99 percent of this country versus the top 100 -- one percent, is staggering. I follow these trends rather carefully but I had no idea of the discrepancy there.(editor's note: ROFLOL)

JOHNSTON: If you chart, Lou, the increase in income for the bottom 99 percent of Americans over that 30-year period, for each dollar that each person got in increased income, and the average was $2,700, less than a hundred dollars a year, you made it one inch high for the top one-one-hundredth of 1 percent, or 27,000 people, it is 625 feet high. 625 feet to one inch.

DOBBS: And the solution is there, the fact that Alan Greenspan, the Fed chairman would raise the issue, I think, is commendable. The suggestion in my opinion that the first solution should be sought is to cut the benefits of future retirees is reprehensible. What is your reaction?

JOHNSTON: Well, we can choose in America, if you want, to have a system in which the middle class and the upper middle class, people making $30,000 to $500,000 a year subsidize people who make millions of dollars. And if Americans want to vote for that they should do it.

I just don't think, Lou, that Americans would have gone for this if they had known what is happening. And since it was Mr. Greenspan who said pay your tax in advance and now he says, no, we're not going to give you the benefits, but we can't raise taxes on the rich. That seems to me morally troubling.

When I combine this with Aaron Brown blowing his stack over the GOP machine's attempt to deep six the 9/11 investigation, I can only conclude the Matrix is experiencing a serious program run error in its CNN subroutine.

If this keeps up, Agent Rove may have to reboot the system -- in which case I assume we'll all wake up tomorrow and it will be September 10, 2001 again.

 

Another simplifed version of what's going on with Greenspan and Social Security. From www.calpundit.com-




THREE CARD MONTE WITH ALAN GREENSPAN....Alan Greenspan's comments a few days ago about the necessity of cutting Social Security benefits struck me as disingenuous, but I didn't realize quite how disingenuous until a couple of things came through my inbox today:

Does Alan Greenspan have amnesia? More than 20 years ago he co-chaired a commission to ensure the solvency of Social Security. That commission recommended stiff increases in the payroll tax to create a surplus that would help fund the retirement of baby boomers down the road. The higher payroll taxes, which put a heavy burden on lower-to-middle income taxpayers, were signed into law and remain in effect to this day.

But in 2001 Mr. Greenspan endorsed a fiscally irresponsible income tax cut that effectively gives away the Social Security surplus he created primarily to high-income taxpayers. Now he suggests that those tax cuts be made permanent, while we reduce the enormous deficits that they've created only through cuts in spending, especially on Social Security.

I hadn't remembered that Greenspan was part of the 1983 Social Security commission that raised payroll taxes. (It's one of several Ronald Reagan tax increases that his fans conveniently forget about when they're extolling the virtues of supply side economics.) Here's the Greenspan timeline:


1983: Recommended raising payroll taxes far above the amount required to fund Social Security. Since payroll taxes are capped (at $87,000 currently), this was, by definition, an increase that primarily hit the poor and middle class.


2001: Enthusiastically endorsed a tax cut aimed primarily at people who earn over $200,000.


2003: Ditto.


2004: Told Congress that due to persistent deficits Social Security benefits need to be cut.


So: raise payroll taxes on the middle class to create a surplus, then cut taxes on the rich to wipe out the surplus and create a deficit, and then sorrowfully announce that the resulting deficits mean that the Social Security benefits already paid for by the middle class need to be cut.

A normal person would at least be embarrassed by all this. But Alan Greenspan has never been a mere mortal, has he?

 

Paul Krugman nails Greenspan's hide to the door. I'm ready to kick his butt out the door and be done with him. The man has reached the end of the line with me. I hope a new Democratic President replaces him.


March 2, 2004
OP-ED COLUMNIST

Maestro of Chutzpah
By PAUL KRUGMAN

The traditional definition of chutzpah says it's when you murder your parents, then plead for clemency because you're an orphan. Alan Greenspan has chutzpah.

Last week Mr. Greenspan warned of the dangers posed by budget deficits. But even though the main cause of deficits is plunging revenue — the federal government's tax take is now at its lowest level as a share of the economy since 1950 — he opposes any effort to restore recent revenue losses. Instead, he supports the Bush administration's plan to make its tax cuts permanent, and calls for cuts in Social Security benefits.

Yet three years ago Mr. Greenspan urged Congress to cut taxes, warning that otherwise the federal government would run excessive surpluses. He assured Congress that those tax cuts would not endanger future Social Security benefits. And last year he declined to stand in the way of another round of deficit-creating tax cuts.

But wait — it gets worse.

You see, although the rest of the government is running huge deficits — and never did run much of a surplus — the Social Security system is currently taking in much more money than it spends. Thanks to those surpluses, the program is fully financed at least through 2042. The cost of securing the program's future for many decades after that would be modest — a small fraction of the revenue that will be lost if the Bush tax cuts are made permanent.

And the reason Social Security is in fairly good shape is that during the 1980's the Greenspan commission persuaded Congress to increase the payroll tax, which supports the program.

The payroll tax is regressive: it falls much more heavily on middle- and lower-income families than it does on the rich. In fact, according to Congressional Budget Office estimates, families near the middle of the income distribution pay almost twice as much in payroll taxes as in income taxes. Yet people were willing to accept a regressive tax increase to sustain Social Security.

Now the joke's on them. Mr. Greenspan pushed through an increase in taxes on working Americans, generating a Social Security surplus. Then he used that surplus to argue for tax cuts that deliver very little relief to most people, but are worth a lot to those making more than $300,000 a year. And now that those tax cuts have contributed to a soaring deficit, he wants to cut Social Security benefits.

The point, of course, is that if anyone had tried to sell this package honestly — "Let's raise taxes and cut benefits for working families so we can give big tax cuts to the rich!" — voters would have been outraged. So the class warriors of the right engaged in bait-and-switch.

There are three lessons in this tale.

First, "starving the beast" is no longer a hypothetical scenario — it's happening as we speak. For decades, conservatives have sought tax cuts, not because they're affordable, but because they aren't. Tax cuts lead to budget deficits, and deficits offer an excuse to squeeze government spending.

Second, squeezing spending doesn't mean cutting back on wasteful programs nobody wants. Social Security and Medicare are the targets because that's where the money is. We might add that ideologues on the right have never given up on their hope of doing away with Social Security altogether. If Mr. Bush wins in November, we can be sure that they will move forward on privatization — the creation of personal retirement accounts. These will be sold as a way to "save" Social Security (from a nonexistent crisis), but will, in fact, undermine its finances. And that, of course, is the point.

Finally, the right-wing corruption of our government system — the partisan takeover of institutions that are supposed to be nonpolitical — continues, and even extends to the Federal Reserve.

The Bush White House has made it clear that it will destroy the careers of scientists, budget experts, intelligence operatives and even military officers who don't toe the line. But Mr. Greenspan should have been immune to such pressures, and he should have understood that the peculiarity of his position — as an unelected official who wields immense power — carries with it an obligation to stand above the fray. By using his office to promote a partisan agenda, he has betrayed his institution, and the nation.

http://www.nytimes.com/2004/03/02/opinion/02KRUG.html?hp

 

One of the dirty little secrets in Washington is that Greenspan is a hard core right winger, especially when it comes to economics.
He is politically astute enough to not let it all hang out when a Democrat is in office.

 

Look, I would love it if there was no problem and SS could last forever in its current state. It's just not going to happen. What we need to do is accept that we need a change and move forward now, not in 10 or 20 years.

Pmoon, I think what you first need to do is quit scaring yourself by reading only the spinning and the fear generating hype of those who want to do away with the system. Once you realize it isn't that desperate than you can look at some of the relatively relatively modest steps needed to preserve the system.

 

glynch, I don't care if Greenspan is a hard-core right winger, a hard-core left winger, or a basket of wings with sauce. If this is the man's policies, I want him gone.


(sorry, equal opportunity bashing today. )

 

Deckard, labels per se ar not vip. However, in this case you have Greenspan who since he was a kid literally hanging around Ayn Rand, has probably always dreamed of doing away with social security one day.

 

Thank you, all I wanted is an admittance that the current system needs some form of change. Even Brookings and other liberal think-tanks suggest making modifications.

I have not once argued for any sort of massive change on this thread, yet you keep arguing back like I have. All I am suggesting is that SS will probably cause a money problem in the future, so perhaps we should look at different ways to fix it.

If you want to debate the solutions in a different thread, then I will gladly join you. Once again though, my point here is that it would be bad for the country and the economy to stand pat.

 

That Krugman article is a great one. It looks like middle class Americans are being asked to pay for tax cuts for the wealthy. Thanks for the read.

 

The rhetoric being thrown around here is refreshing indeed. As a matter of fact I could have predicted this would have happened:

1. SS needs changes, lets discuss
2. No it doesn't, it just a rich conspiracy to privatize
3. Alan Greenspan wants to steal money from the poor and give it to the rich. Booooooo!

Now, to cap it off, we need an op-ed or web page that says that Greenspan is trying to steal money from old people.

 

Can you rebut any of Krugman's information with anything concrete, or are you blowing smoke out of your a$$?

 

Andy, Krugman is as liberal as they come. In fact, you can take a look for yourself at his past op-ed pieces:

link

Love him or hate him (and I do enjoy reading his articles), he's as left-leaning as they come.

link


Andy, I could go on and on about how tax cuts were not aimed at the rich, they're intended to stimulate the economy, and Greenspan is not in the Republican party's back pocket like posters here insist (he had a particularly bad relationship with James Baker & Bush Sr. who blamed him for the '92 loss.) I could post links to economists from the neoclassical school of thought, which would be immediately be discounted (such as earlier in the thread when I posted a link to CATO.) I could even ask you to post something from a more moderate source like I did.

But I guess we'll have to agree to disagree and let this thread die.

 

I've heard that argument and it's totally bogus. If I make 3 mil a year, I don't need a tax break to invest money. I already have plenty to invest. The tax cuts just give me more. But If there were a payroll tax cut, and I'm a working middle class American on a budget, I might take my new found dollars and spend it back into the economy, which of course would help create jobs etc.

 

Let's see... several Republicans (and maybe a few Democrats, to be fair) want to do away with Social Security as we know it, and replace it with some form of personal/Federal stock investment with future benefits tied to how the market does... the stock market and the bond market, and how you chose to invest.

Private companies with defined benefit retirement plans (that's when you get actual retirement benefits, folks, like Texas State employees, for example, and you know how much you and/or your spouse are getting for the rest of your lives after retirement) are scrambling to cover their retirees and future retirees, frequently "punting" the whole thing, saying, "Sorry. We know you worked and planned those decades with us with the understanding that you would get "x" number of dollars/benefits for a certain length of employment, but it ain't going to happen."

Then there are lots of wage-earners who plan on retiring on a "basket" of Social Security, 401k's and the like, and personal savings of one kind or another. Many of them are also looking at defined benefit retirement income as well from one spouse or the other. Those people, assuming they get what they think they will, are sitting pretty good. But even if they aren't planning on SS to cover the bulk of their retirement expenses, it does factor into their planning and is important.

So, in the very uncertain climate facing possible retirees, we want to take away the certainty of one significant part of their retirement and hope for a performance in the market better than that of the Fortune 500 companies who are dropping their defined benefit programs because of the loses they suffered there? And your average potential retiree is supposed to be able to do a better job than those multi-billion dollar companies with infinite resources of financial advice?

Sorry, but it doesn't sound like a good idea to me. And my wife and I, with my wife a year from retiring (the state of Texas is trying to get it's highest paid employees to leave early with incentives), fall into the last group of people, with a variety of retirement incomes... SS being one of them. We plan on that SS income, even though it'll be some years before we get it.

We're far from being able to stop working. My wife will continue to work for the state, for example, after she retires. "Being able" probably isn't the right phrase. "Wanting to" is a better one. We just have a bigger retirement income if we continue to work for now, but it's our choice.

I'm just talking about the middle class. What about the folks who aren't in that category? They need the "defined benefits" of Social Security more than anyone. We need to end the bogus use of SS taxes for other uses. "We" keep electing politicians who promise not to "touch" SS tax income and they keep doing it... it's like a drug they can't stop using, even if they think they should. We need to pass strong legislation preventing the Congress and administrations from doing just that.

P. Moon, you use "Liberal" as a perjorative term. I would use it as a compliment.

 

Nothing intrinsically bad about being "liberal" (of course I consider myself a classic economic liberal ) just making the point that Krugman is not an unbiased point of view.