Greenspan's Con Job

Article excerpt

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 opinionmongers. 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. …