In the January 4 Financial Times, Alan Greenspan implies tomorrow’s senior citizens are the new welfare queens. “The welfare state in the United States has run up against a brick wall of economic reality and fiscal bookkeeping,” he wrote, because Congress “has enacted increases in entitlements without visible means of funding them.” He isn’t talking about Black people and Immigrants in older central city ghettos. He is talking about benefits for seniors. “The only viable long term solution appears to be a shift in federal entitlements programs to defined contribution status.” So he is asserting that his generation, and the ones immediately after, should only get back what they put in? Almost certainly not. After all, the baby boomers were “the most productive” in U.S. history according to Greenspan, whereas those who will replace them in retirement are those “who in 1995 shocked us by scoring so poorly on maths and in international science competitions.” Let’s give them the poverty and early death they deserve, says Generation Greed’s Greenspan.
What is particularly outrageous about this is not so much what is said but the man who said it. This is Alan Greenspan we are talking about. Remember 1982? Remember 2001? Remember 2007? The best that may be said of Greenspan is that his mistakes enabled those now 55 and over to benefit at the expense of those coming after, and those getting rich as their companies, particularly financial companies, were pillaged to benefit at the expense of the rest. It may be more accurate to claim that these were not mistakes.
In 1982, Greenspan chaired the 1982 task force that jacked up regressive payroll taxes to "Save Social Security." Those who started their careers in 1983 and after have faced radically higher payroll taxes throughout their lives, and payments into Social Security have massively exceeded payments out throughout most of those years. But those over 55, the ones running the government, used all the excess for higher health care spending for today’s seniors, and lower income taxes on the wealthy, leaving behind nothing but a pile of IOUs. It is those over age 55 who benefitted in both cases. All Greenspan did was shift the tax burden downward, while making a promise to younger generations about old age that he now says that his generation cannot afford to keep. Because they have needs, you know, and it’s too late to ask them to make adjustments. In the Wikipedia entry on his life, this does not even make it to the long list of criticisms of his policies.
About the only time since 1983 that the extra Social Security money people supposedly paid for the future was not instead used to party on at the time was the late Clinton Administration. But in 2001, then Fed Chairman Greenspan testified to Congress that the U.S. could easily afford drastically lower progressive income taxes. The same Greenspan who now says that Congress did not put aside enough money to pay for its promises. Having acted in the early 1980s to benefit his generation at the expense of those coming after, Greenspan acted in the early 2000s to benefit those in his tax bracket at the expense of everybody else. In each case telling a lie that was politically convenient for those in power.
In fact, his entire tenure at the Federal Reserve may be construed as an attempt to have the government redistribute income – to those at the top from the rest. Throughout this period for a growing share of Americans, and then most Americans, and now nearly all Americans, median wages were falling. This, it seems, did not merit any government action and concern. After all, those who came of age after the 1960s are less deserving, Greenspan has finally decided to rationalize, because they are less capable. Was it their genes, Mr. Greenspan, or perhaps the quality of their parenting but those now age 55 and over compared with those coming before?
So falling wages, no problem. People could just go into debt to keep spending, Greenspan decided while at the Fed.
But falling asset prices, prices for assets primarily held by the rich and older generations? Big problem. Something must be done. Repeatedly Greenspan held that falling financial asset prices justified lower interest rates. So younger generations, if they wanted to save for their own retirement, could pay more up front and get a lower return. So as bubbles inflated interest rates went lower, and lower, and lower. To the point where today, under Republican Bernanke, interest rates are being pushed down to zero. Because if they weren’t (and when they are not longer), stock and bond and housing prices would crash. After all those years of the Greenspan put and soaring debts, the financial house of cards did collapse starting in 2007. We are still in the early stages of this, as massive federal action financed by debt attempts to put of the pain. The federal government is bankrupting itself due to the consequences of Greenspan’s bubbles.
Speaking of Republicans and entitlements, when did Congress enact an increase? Who decided to promise seniors people something that had not been promised before? I believe it was a Republican President and a Republican Congress, the same people who had been told by Greenspan that they could cut income taxes on the wealthy with no problem. That’s the same Republican Party that, at the national level, is against the modest restrictions on Medicare spending for today’s seniors that were part of health care reform, as well as the increases in federal spending on those who are not currently age 55 and over. That’s the same Republican Party that still believes we can maintain drastically lower income taxes for the wealthy, but cannot afford to cut payroll taxes for the working poor.
The national Republican Party has been selling out everyone now 54 and younger for 30 years, with Alan Greenspan as the cheerleader. Their actual philosophy is no different than New York’s state Democrats and the public employee unions that control them. Enrich their generation, and then slash the well being for younger generations some time later due to “circumstances beyond our control.”
Greenspan has been associated with some of the greatest (again, generously speaking) public policy failures in U.S. history, and his generation will be the first to leave future generations of Americans much worse off. So why is he invited to write an essay in the Financial Times under their “A-list” series? Because after a career pandering to privilege, he is a celebrity. We need a financial “truth and reconciliation” committee in this country. Only those age 45 and younger should be permitted to serve on it. Greenspan is among those who should be grilled on the stand.