Alan Greenspan is retiring and George Bush has appointed a successor. The successor is to be Ben Burnanke. Preliminary indications are that he is qualified which is, obviously, a break from Bush’s usual choices in appointments. Apparently Mr. Bush couldn’t find any old frat brothers who had led a town chamber of commerce or something.
In any event, I recalled a March 15, 2005 entry where I had discussed Mr. Greenspan a bit. This was back when Bush was pounding the drum on Social Security. Remember Social Security? If you’ll recall, it was a crisis. Such a crisis, apparently, that no Social Security legislation has even been introduced to the Congress. So much for spending that political capital. Not being one to work any harder than I have to, I thought I’d just repost the Greenspan entry.
From March 15, 2005:
Greenspan ducks and weaves on deficits
As a fiscal conservative, I have to take Alan Greenspan to task for his testimony before the Senate, at least as it was reported in the New York Times, when he was charged with being complicit in the return of large deficits.
Greenspan has come under fire for his support of Bush’s plan to privatize Social Security. The premise for Bush’s plan is that there is a Social Security crisis because expenditures will exceed income in 2018 or thereabouts. That really isn’t a crisis for Social Security because it has a stockpile of Treasury Bills it’s been buying with the surplus revenues received through Social Security payroll taxes over the years.
That could be a problem for the federal government when Social Security cashes in on the Treasury Bills. The reason the federal government is in bad shape is because of the rampant deficit spending in which it has engaged for the past 25 years, with a brief respite in the second half of the 90s. The return to deficit spending over the past 5 years is due in good measure to the Bush tax cuts. The Bush tax cuts were greenlighted by Greenspan. That Greenspan would participate in trying to disguise the federal general fund’s problems as a Social Security problem is particularly repugnant since Greenspan, during the Reagan years, was responsible for increasing the payroll taxes as a way to make Social Security fiscally solvent.
Now, consider what a remarkable bait and switch Greenspan would have pulled off if Social Security benefits are reduced because of Bush’s talk of a crisis:
What has just happened if that comes to pass? Greenspan has helped use the more regressive Social Security taxes to pay for Bush’s tax cuts for the very wealthy. Quite a trick.
Now, on Greenspan’s defense for greenlighting the Bush tax cuts:
he supported Mr. Bush’s tax cuts because almost all budget analysts were forecasting trillions of dollars in surpluses that never materialized.
As events turned out, federal deficits rose as tax revenues plunged for three years in a row and spending grew on everything from war costs in Afghanistan and Iraq to education and homeland security. What was expected to be a $5.6 trillion surplus by 2011 is now expected to be at least a $4 trillion deficit by 2015 if Mr. Bush’s tax cuts are made permanent.
“We were confronted at the time with an almost universal expectation amongst experts that we were dealing with a very large surplus for which there seemed to be no end,” Mr. Greenspan told members of the Senate Select Committee on Aging.
Why that’s just hogwash. It was pretty clear by 2001 that the dotcoms were tanking. Throughout the 2000 Presidential Campaign, Bush repeatedly said that the economy was about to falter.
I may be bragging, but I knew deficit spending was just around the corner. And Greenspan’s presumably smarter than I am. I probably can’t lay this one at Greenspan’s feet, but I do recall that a proposal to amend the tax cut legislation was voted down that would have added a trigger removing the tax cuts if deficits returned. So the tax cut proponents were quite cognizant of the likelihood of deficit spending being caused by those tax cuts.
I’m afraid I tend to go on and on about deficit spending. For at least the past 15 years, it’s been my #1 political concern. I vote for the candidate that, in my opinion, is most likely to pay down the debt. That’s why I voted for Perot in ’92 and ’96 (silly as it seems now). From my perspective, the Boomers are mortgaging GenX’s future, and that’s simply unacceptable.
Posted by Doug at March 15, 2005 08:04 PM
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Back to the present day, 10/24/05. I’m digressing a bit, but I just came across a New York Times Magazine article that touches on the subject of Red-Ink Republicanism. It’s an interview with Florida Senator Connie Mack.
[The President] would like to eliminate the estate tax permanently.
I think there is a likelihood that Congress will deal with that issue before this term comes to an end. I would vote to eliminate, as we refer to it, the death tax. I think it’s an unfair tax.
Really? I think it’s a perfect tax. The idea behind it was to allow people to postpone paying taxes until they die, at which point they presumably no longer care. Why do you call it unfair?
Well, let’s say, if you are in the farming business and you have the desire to pass this farm on to your children. The problem is that when your parents die, you have to come up with cash to pay the estate tax. One thing you don’t have is cash. You’ve got plenty of land. So I just don’t believe it’s a fair tax.
That strikes me as a red herring. The issue is not really small farms, but zillion-dollar estates made up of stocks and bonds.
I don’t know what the percentage breakdown is. I still go back to the same notion that these individuals who have accumulated these resources have paid taxes on them many times in their life, and then to say, when you die, now you pay more taxes on it? There is a limit.
Well, the U.S. government has to get money from somewhere. As a two-term former Republican senator from Florida, where do you suggest we get money from?
What money?
The money to run this country.
We’ll borrow it.
I never understand where all this money comes from.
When the president says we need another $200 billion for Katrina repairs, does he just go and borrow it from the Saudis?
In a sense, we do. Maybe the Chinese.
Is that fair to our children? If we keep borrowing at this level, won’t the Arabs or the Chinese eventually own this country?
I am not worried about that. We are a huge country producing enormous assets day in and day out. We have great strength, and we have always adjusted to difficulties that faced us, and we will continue to do so.
There you have it. Screw the children. Who cares if the Arabs or the Chinese own it. As long as we get our tax cuts *now*.
This morning, I was listening to a radio interview with a woman who had studied the GI Bill, and it occurred to me that previous generations successfully grew the economy. Our generation is mining it.
Whereas previous generations saved and sacrificed and plowed some of the fruits of their labor into the economy so that it increased, it seems that our current political leadership is willing to strip our economy and extract as much value as possible out of it before it plays out and crumbles.
Can you imagine the current leadership proposing something as audacious as the GI Bill? Making the rich pay more for their country so that those of humble means who have served their country well can get a free ride to college? I’m sure you’d hear the ominous rumblings about “class warfare” were the suggestion to be made.
I’ve wandered a bit far afield from Mr. Greenspan. I could probably use an editor.
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