Tuesday, December 22, 2009
This guy should be pilloried:Alan Greenspan
Alan Greenspan, former Federal Reserve chief, warned today on the risks US social programmes - Medicare, Medicaid and Social Security - pose to the US’s ability to finance its deficits in testimony prepared for the Senate Committee on Homeland Security.
For more than two centuries, we have been able to hold the level of U.S. federal debt to well below our long-term capacity to borrow.
But for the next decade or two, on some reasonable sets of assumptions, our borrowing cushion shrinks significantly, threatening to test our capacity to raise funds to finance unprecedented deficits.
The challenge to contain this threat is more urgent than at any time in our history, in part because of today’s limited flexibility of adjustment, especially of entitlement spending whose constituencies are well entrenched.
Had the 2001 and 2003 Bush tax cuts - which Greenspan supported - not been implemented, then the deficits would have been reduced (or even slightly positive for a bit). That would have allowed new debt to be issued while the Social Security bonds are being redeemed. And no budget crunch - at least as far as Social Security is concerned - would take place. A budget crunch that now appears to require higher taxes, decreased non-entitlement federal spending, or defaulting of SS bonds.
Greenspan knew, and knows this. His advocacy of the 2001 and 2003 tax cuts was designed to cripple a sound mechanism for handling the Baby Boom demographic as it (a) first paid in, and (b) later draws out, retirement funds.
Not at all shocking; the "Shock Doctrine" marches forward.
If you look over Greenspan's career as Fed chair, it pretty much comes down to two things:
1. Keeping inflation down by keeping unemployment up, and
2. enabling whatever tax-cut scheme his Republican masters come up with while demanding the utmost fiscal restraint out of Democrats.
Greenspan counseled Bush I against raising taxes, then demanded that Clinton slash welfare (but not defense) spending. He was pushing for yet more spending cuts right up until Bush II won--at which point Greenspan decided that spending restraint was just soooooo 20th century.
It's much worse than that. Greenspan chaired the commission in the early 1980s that recommended increasing the payroll tax so that SS could build up a surplus in the trust fund.
God, may that scumbag rot in hell.
What we are seeing is what we knew all along. The Social Security Trust Fund, Al Gore's "lock box", is full of debt, not money. The government dutifully collected all that "extra" social security money, but now it can't pay it back, because it spent it as fast as it took it in.
Back then, Social Security was a "sacred trust" between generations. That was when it was bringing in a net surplus that could be spent away by the government. Now that social security is paying out more than it is bringing in, it is suddenly "unsustainable" and needs "reform."
Meaning the Ponzi scheme is over. It's time for the government to start finding ways to justify reneging on that inconvenient file cabinet full of treasury bonds.
Watch and see.
It's time for the government to start finding ways to justify reneging on that inconvenient file cabinet full of treasury bonds.
Dur. Raise taxes on the rich, those well over the FICA cutoff. This isn't rocket science.