The Class Warrior
Stay up to date with the latest headlines via email.
After supporting tax cuts for the wealthy, which have already blown a gaping hole in the federal budget, Federal Reserve Chairman Alan Greenspan told lawmakers on Wednesday that Congress should extend the cuts indefinitely -- at a cost of $1.5 trillion over the next ten years -- and pay for it by slashing Social Security.
Greenspan's comments were particularly surprising because our current budget problems are completely unrelated to Social Security. A recent Center on Budget and Policy Priorities study reveals that, in the last three years, the nation's long-term budget projection has gone from a $5 trillion surplus to a $4.3 trillion deficit and tax cuts were the single largest factor behind that decline. The large role of tax cuts in the deficit has been confirmed by the President's own budget analysis. Social Security, meanwhile, continues to run a surplus. Greenspan's recommendation amounts to a huge transfer of wealth from future retirees to the very rich. The President, for his part, dodged a direct question yesterday about whether he believes, as Greenspan does, we should scale back Social Security to deal with the rising budget deficit, saying he needed to "see exactly what [Greenspan] said."
On Wednesday, Greenspan argued that the tax cuts should be extended because allowing them to rise to their previous levels would "pose significant risks to...the revenue base." But when he argued in favor of Bush's first tax cut in January 2001, he made the opposite argument -- that lowering tax rates was necessary to reduce revenue. Greenspan was worried that the government would quickly pay off the entire deficit and be awash in so much money it wouldn't have anywhere productive to spend it. The Washington Post reported on January 27, 2001 that Greenspan "justified his support of tax cuts by focusing on a problem that may not even emerge until the end of a possible second Bush term -- the government being forced to buy private assets because it had paid off all the national debt and still had buckets of cash left over." Given the dramatic turnaround in the nation's fiscal health -- a $9.3 trillion turnaround in just three years -- Greenspan's prediction was horribly wrong.
When he was aggressively pushing the President's massive tax cut in 2001, Greenspan was directly questioned about its effect on Social Security. On March 2, 2001, Rep. Carolyn McCarthy (D-NY) asked Greenspan, "Do I want tax cuts?...this is my problem: there's such a considerable measure of uncertainty in the projections over the course of the baby boomers' retirement that how are we going to prepare for this?" Greenspan responded that there was no reason for concern because "despite the fact that there is a very dramatic rise" in the retiring population from the Baby Boom, "the effect of [the] acceleration in productivity" will mean that revenues will be "more than adequate to meet that big surge through a goodly part of the decade subsequent to 2010."
While Greenspan claims that his recommendations are in response to recent budget deficits, cutting Social Security was on his agenda long before deficits emerged. The Wall Street Journal has complied a litany of such comments dating back to November 1997. In 2001, when Greenspan became a champion of the President's tax cuts for the wealthy, Rep. Robert T. Matsui (D-CA) predicted Greenspan's desired outcome. On January 27, 2001, Matsui told the WP: "What [Greenspan's] done is created a situation where we'll have benefit cuts in Social Security. That's inevitable if you have a $2 trillion tax cut. And maybe that was his ultimate goal."
On Wednesday, Greenspan tried to whitewash the Administration's job crisis, saying "progress creating jobs has been limited." But since the Administration has taken office, the economy has shed more than 2 million jobs and, at the current pace of job creation, it would be May 2007 before the first net new private-sector job was created. Meanwhile, the WP reports, "More than 2,400 employers across the country reported laying off 50 or more workers in January, the third-highest number of so-called mass layoffs since the government began tracking them a decade ago." The Administration attempted to eliminate the statistic in 2002, until stopped by Congress.