03/11/2004: 
Fraud & Conspiracy
gr335p@n's con job?
from The Nation
referred by alert reader Thomas Pain(e)
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."
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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 right-wingers 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 new 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 right-wing 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.
3 Annotations Submitted
Thursday the 11th of March, rafuzo noted:
Man, talk about a con job, let's talk about the one this author pulls on the reader.
Here, it's the notion of a SS 'lockbox', where everyone who pays into the system is supposed to have their payments put in some envelope, that simply gets opened at retirement age. This is simply not true; were it, the feds would not be able to borrow against it as easily. No, what you pay today goes right out the door tomorrow. The SS system has always operated this way. The only credit we SS payers have is our own (quite rightly justified) sentiment that we ought to get back what we put in.
But as everyone knows, to even get back what we put in these days, we'd have to live for about 70 years after retirement (mandated, by the gov't, as age 65). Nobody has any illusions that we will be getting back what we put in. So why does this author argue as if he has a moral leg to stand on here? It's not like there aren't a gaggle of federal boondoggles that suck up our tax dollars, for which we the gullible public expect some sort of benefit (though at bargain-basement-closeout value). This same author, who would tut-tut the follower of such a "brittle philosophy" as "There ain't no such thing as a free lunch" for asking "where's the benefit of our paying prisoners' cable bills?" is now expecting us to argue, along with him, that not only will SS pay us back (a laughable notion in its own right), but that we should expect it to.
An epic swindle indeed.
Thursday the 11th of March, prof noted:
i posted this one mostly out of an exercize in how the "other side" feels. readers familiar with The Nation will no doubt know that they have port side view point.
alert reader Thomas Pain(e), who tipped me off to this article said-"look- refers to greenspan as a objectivist" which obviously pid my interest.
for a year or two, i've always assumed that my benefits would not be the same as my parents, simply by looking at demographics one can deduce that there will be about 1 child paying for every 2 parents. it's a federally mandated ponzi scheme.
now, the question of what to do about it? i can't seem to trust individual investment accounts, i already have a 401k vested in the stock market, i need to diversify my bonds n*gg*!
any ideas?
Thursday the 11th of March, IBNR noted:
Your 401 K will save the day.
But short term muni's and options are another way to go
