2.18.2005
What Does Alan Greenspan Want? (NYTimes.com)
EDITORIAL
Published: February 18, 2005
It was inevitable that Alan Greenspan would make news when he testified before the Senate Banking Committee on Wednesday that he supported private accounts in Social Security. "So if you're going to move to private accounts, which I approve of," he said, "I think you have to do it in a cautious, gradual way."
But Mr. Greenspan said so much more that, by any measure of logical consistency, could hardly be read as approval.
He said repeatedly that the crucial underlying problem for the United States economy was a lack of national savings - the sum of government and individual savings, an important aspect of the nation's overall standard of living. Under questioning, he also said, repeatedly and quite rightly, that moving to private accounts within Social Security would not add to national savings. That's because every dollar that went into a private account would be offset by the money that the government would need to borrow upfront to establish the private system.
Mr. Greenspan also stressed the importance of closing Social Security's long-term funding gap - an estimated $3.7 trillion hole that will develop over 75 years, the usual span of time used by Social Security's trustees to gauge the system's soundness. Then he pointed out that money accumulating in private accounts would do nothing to close the long-term funding gap in Social Security. The only way to do that is to increase taxes or cut benefits, or to adopt some combination of the two. Unlike the president, Mr. Greenspan acknowledged the huge benefit cuts that would be inherent in a private system. Speaking of Mr. Bush, he said, "I gather what he has in mind is that the amounts that go into the private accounts are offset, after discount, with benefits that would have been paid with those monies in the Social Security system." That's Greenspan-ese for this: "Every dollar you put into a private account, plus interest, would be subtracted from your traditional Social Security benefit."
(More ... The New York Times > Opinion > Editorial: What Does Alan Greenspan Want?) ¶ 23:16
Published: February 18, 2005
It was inevitable that Alan Greenspan would make news when he testified before the Senate Banking Committee on Wednesday that he supported private accounts in Social Security. "So if you're going to move to private accounts, which I approve of," he said, "I think you have to do it in a cautious, gradual way."
But Mr. Greenspan said so much more that, by any measure of logical consistency, could hardly be read as approval.
He said repeatedly that the crucial underlying problem for the United States economy was a lack of national savings - the sum of government and individual savings, an important aspect of the nation's overall standard of living. Under questioning, he also said, repeatedly and quite rightly, that moving to private accounts within Social Security would not add to national savings. That's because every dollar that went into a private account would be offset by the money that the government would need to borrow upfront to establish the private system.
Mr. Greenspan also stressed the importance of closing Social Security's long-term funding gap - an estimated $3.7 trillion hole that will develop over 75 years, the usual span of time used by Social Security's trustees to gauge the system's soundness. Then he pointed out that money accumulating in private accounts would do nothing to close the long-term funding gap in Social Security. The only way to do that is to increase taxes or cut benefits, or to adopt some combination of the two. Unlike the president, Mr. Greenspan acknowledged the huge benefit cuts that would be inherent in a private system. Speaking of Mr. Bush, he said, "I gather what he has in mind is that the amounts that go into the private accounts are offset, after discount, with benefits that would have been paid with those monies in the Social Security system." That's Greenspan-ese for this: "Every dollar you put into a private account, plus interest, would be subtracted from your traditional Social Security benefit."
(More ... The New York Times > Opinion > Editorial: What Does Alan Greenspan Want?) ¶ 23:16
