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.
Leave a Reply