Alan Greenspan touched the third rail of politics Wednesday —
he told the truth.
The Chairman of the Federal Reserve had been asked to speak to
the House Budget Committee on Social Security and Medicare. And
with his characteristic precision, Greenspan told legislators that
they lacked “the resources to do it all.” Minutes after the hearing
ended, a bi-partisan coalition took to the airwaves to mock and
belittle the Fed Chairman, while assuring the American people that,
yes, their government can and will “do it all.”
Most depressingly, there was not a single well-publicized
characterization of Greenspan’s testimony that approached anything
resembling honesty. (A transcript is available here) For all the bad acting it inspired, what
Greenspan actually said was that “the enormous uncertainty” over
the massive outlays Social Security and Medicare will soon require
was a problem worthy of more than idle discussion.
“I believe that a thorough review of our spending commitments —
and at least some adjustment in those commitments — is necessary
for prudent policy,” Greenspan said. This might seem a bit glib
considering the topic, but Greenspan is well known as a forward
thinker. He’s not the kind of man to sit around and wait for the
storm to gather and then play crisis control. That’s a job for our
elected representatives.
THE SITUATION IS DIRE, however. According to a study by the Cato
Institute, Social Security is not only the largest U.S. government
program, accounting for 23 percent of total federal spending, it is
“the largest government program in the world.” And within
15 years, Social Security will begin to spend more on benefits than
it takes in. In his testimony Greenspan recommended taking steps to
solve this problem.
The facts are on his side: From 1935 until 1950, Social Security
absorbed only 2 percent of a worker’s net income (one percent from
the employee, one percent from the employer). Today it is 15.3
percent (7.65 percent employee, 7.65 percent employer). Greenspan
pointed out that we now have three workers supporting each retiree
on Social Security. By 2025 that will be reduced to just over two
workers for each retiree. We face an unprecedented deficit and the
looming retirement of 77 million health-nut baby boomers.
Greenspan said what needed to be said. Either the retirement age
has to go up or Congress will have to find a way to lower yearly
increases in benefits. But the Fed Chairman was hardly callous in
his recommendations. “I also believe that we have an obligation to
those in and near retirement to honor what has been promised to
them,” he explained. Changes should be implemented “soon enough so
that future retirees have time to adjust their plans for retirement
spending and to make sure that their personal resources, along with
what they expect to receive from the government, will be sufficient
to meet their retirement needs.”
IT WAS HARDLY let-them-eat-cake material, but Greenspan’s testimony
was greeted as “outrageous, insipid, preposterous” by Sen. Arlen
Specter, who declared the Greenspan plan “the worst idea I ever
heard of.” Rep. Pat Toomey, Specter’s conservative challenger in
the upcoming Pennsylvania Republican primary, admitted there was an
entitlement problem, but still protested: “This is exactly the road
I don’t want to go down and won’t support.”
Sen. John Kerry called for a tax increase to stave off Social
Security cuts. Terry McAuliffe, determined not to be out-lied or
out-spun, made up his own version of the testimony: “President Bush
paints a rosy picture of the economy, but Alan Greenspan’s warning
today couldn’t have been clearer — President Bush’s economic
policies have been a disaster,” he said. So bad, in fact, that “the
Federal Reserve Chairman has recommended severe cuts to Social
Security or raising taxes.” Predictably, William Novelli, head of
the AARP terrorist group, said trimming benefits “would be unfair
to boomers and younger workers, pulling the rug out from under
their retirement security.”
Perhaps most laughable of all the attacks came from Sen. John
“two Americas” Edwards who was “outraged” that the financial guru
would suggest “that we should extend George Bush’s tax cuts on
unearned wealth while cutting Social Security benefits that working
people earn.” Just raise taxes and — poof! — the problem goes
away.
A few hours later Edwards released his inspiring but vague plan
to “raise 10 million people out of poverty” to some fanfare. “When
did it become acceptable to dismiss our challenges as just the way
things are?” Edwards asked supporters. “When did it become
acceptable to ignore our toughest problems because they would take
decades and decades to solve? When did ‘it’s just too hard to do’
become an excuse?”
When, indeed, John? I think it was right about the time Alan
Greenspan finished up his testimony and handed the Congressional
asylum back to the inmates.
