Alan Greenspan, Social Security and other questionable assumptions
I had barely begun my adult working life in 1983 when Alan Greenspan was appointed the chairman of a commission charged with figuring out a way to keep Social Security from going broke.
The commission recommended changing Social Security from a pay-as-you-go system, one in which this year's workers pay this year's retirees' benefits, to a trust-fund system, intended to build up enough of a surplus so that the money would be there to pay baby boomers' benefits when they began retiring. As part of those changes, the amount withheld from workers' checks for Social Security (FICA) was raised -- a regressive tax increase because only about the first $75,000 or so ($87,900 in calendar year 2004) of income was subject to it.
Still, the change had the merit of forcing working people to pay more toward their own retirement, and it was projected to lead the Social Security trust fund toward the goal of having a $1.5 trillion surplus on hand when the baby boomers started retiring in large numbers.
Just one tiny problem: Congress looted the trust fund, so to speak, by using that surplus to disguise the true size of the budget deficits we ran in the 1980s and most of the 1990s. That is to say, we used the Social Security surplus to fund government spending and investment. And Greenspan, knowing this, nonetheless said during the 2000 campaign that George W. Bush's proposed tax cuts wouldn't harm Social Security -- even though he knew those tax cuts actually would have to be paid for, to a significant degree, with Social Security money.
But those cuts were approved, as were additional cuts in 2003. And so what happens? Earlier today, at an economic conference in Wyoming, Greenspan called for scaling back federal retirement benefits, warning, "If we delay, the adjustments could be abrupt and painful."
Grrrr. I'd like to show him "abrupt and painful."
I'm not arguing against changes to Social Security, in and of themselves. But I dearly wish our elected officials would bring themselves to discuss the costs of their proposals, and who pays and who benefits, honestly. We Americans are big boys and girls. We can handle the truth.
