by John M. Curtis
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Copyright February 15, 2005
All Rights Reserved.

himing in on the Social Security debate, the White House seeks Federal Reserve Board Chairman Alan Greenspan's approval on its proposal to create private investment accounts. With the government swimming in red ink, the administration wants Greenspan's OK to borrow untold billions—maybe trillions—to finance the Social Security shortfall expected when younger workers begin diverting 4% of their payroll taxes into private accounts. Greenspan has already telegraphed his view that economy can't afford to continue funding Social Security without catastrophic effects. “If we have promised more than our economy has the ability to deliver to retirees, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels,” said Greenspan last September, responding to the Pentagon's drain on the economy.

      Greenspan had no problem in 1998 bailing out the elite hedge-fund Long-Term Capital Management from bankruptcy. While he cited “global” concerns about letting the risky hedge-fund go under, Greenspan knew many of its key players and principal investors. When Greenspan began hiking interest rates in 1998, few investors anticipated the market crash in 2000, liquidating $3-trillion in personal and corporate wealth. Many investors lost large chunks of retirement portfolios, leaving them exposed and vulnerable to market vacillations. Now President George W. Bush wants Greenspan to endorse diverting precious Social Security funds into the risky stock market. Greenspan himself invests only in U.S. treasuries, shielded from market meltdowns. How ironic that Bush wants the U.S. treasury king to endorse his plan to allow younger workers to invest in the stock market.

      Bush's economic policies have increased the share of Gross Domestic Product diverted to the Pentagon. Like the old Soviet Union, the U.S. economy now usurps an unprecedented amount of GDP for the military and national defense. Sept. 11 gave Bush a mandate to beef up national security not eviscerate Social Security or threaten the future of retirees. “As a nation, we owe it to our retirees to promise only the benefits that can be delivered,” said Greenspan, admitting that it's impossible for the economy to accommodate both the exigencies of funding Social Security and simultaneously an unending war on terror. Bush has asked for another $82-billion installment to help keep funding the wars in Iraq and Afghanistan. Greenspan has made it clear that the economy can't afford both. It's not rocket science to figure out that Greenspan supports private Social Security accounts.

      Bush's private accounts make sense to Greenspan because they reduce by 4% the share the government pays in future benefits. Experts have already said private accounts won't solve the long-term insolvency issue. Bush insists all options are on the table except “raising the payroll taxes.” Does it raise the payroll tax to make all Americans pay their fair share? Why should workers earning below $87,000 pay a higher fraction of earnings in Social Security taxes? Ending the sealing on the payroll alone would guarantee solvency into the foreseeable future. Forget about creating a “means test,” assuring that billionaires and former presidents no longer cash Social Security checks. Back in the 1980s, Greenspan once worked on the National Commission on Social Security, increasing the retirement age from 65 to 67. There are plenty of options to fix today's Social Security system.

      While getting Greenspan on the “private account” bandwagon lends credibility to Bush's plan, it doesn't deal with practical ways to fix Social Security. It's unrealistic for the White House to continue allowing the nation's elite to cash Social Security checks. “Obviously, the chairman's views on major policies that affect the economy are important,” said White House spokesman Trent Duffy, admitting that the administration has already tapped Greenspan's views. Yet the White House doesn't consult Greenspan about how the wars in Afghanistan and Iraq impact the economy. Greenspan already telegraphed that he doesn't think the economy can handle both massive military expenditures plus the current Social Security onus. Why isn't the White House asking Greenspan about the affordability of the current war on terror? Greenspan shouldn't be exploited to sell Bush's pet projects.

      Winning Greenspan's approval on privatizing Social Security breathes new life in a proposal that's dead-on-arrival. Pushing Greenspan to sign on gets the Fed into messy business of partisan politics. When Greenspan signaled three years ago that he didn't think tax cuts were needed to stimulate the economy, he was shunned by the White House. Greenspan thought the Fed's monetary policy was enough to move the economy. Now that Bush wants to sell private Social Security accounts why not get Greenspan's OK. “The White House feels it's imperative that whatever plan they come out with has Alan Greenspan's endorsement,” said an unnamed GOP operative, concerned that Bush's privatization plan is in trouble on Capitol Hill. Whatever Greenspan's personal views on Social Security, he shouldn't be tapped to sell Bush's plan. If all options are really on the table, then it's time to come up with a fix.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's the editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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