THREE CARD MONTE WITH ALAN GREENSPAN….Alan Greenspan’s comments a few days ago about the necessity of cutting Social Security benefits struck me as disingenuous, but I didn’t realize quite how disingenuous until a couple of things came through my inbox today:
Does Alan Greenspan have amnesia? More than 20 years ago he co-chaired a commission to ensure the solvency of Social Security. That commission recommended stiff increases in the payroll tax to create a surplus that would help fund the retirement of baby boomers down the road. The higher payroll taxes, which put a heavy burden on lower-to-middle income taxpayers, were signed into law and remain in effect to this day.
But in 2001 Mr. Greenspan endorsed a fiscally irresponsible income tax cut that effectively gives away the Social Security surplus he created primarily to high-income taxpayers. Now he suggests that those tax cuts be made permanent, while we reduce the enormous deficits that they’ve created only through cuts in spending, especially on Social Security.
I hadn’t remembered that Greenspan was part of the 1983 Social Security commission that raised payroll taxes. (It’s one of several Ronald Reagan tax increases that his fans conveniently forget about when they’re extolling the virtues of supply side economics.) Here’s the Greenspan timeline:
1983: Recommended raising payroll taxes far above the amount required to fund Social Security. Since payroll taxes are capped (at $87,000 currently), this was, by definition, an increase that primarily hit the poor and middle class.
2001: Enthusiastically endorsed a tax cut aimed primarily at people who earn over $200,000.
2004: Told Congress that due to persistent deficits Social Security benefits need to be cut.
So: raise payroll taxes on the middle class to create a surplus, then cut taxes on the rich to wipe out the surplus and create a deficit, and then sorrowfully announce that the resulting deficits mean that the Social Security benefits already paid for by the middle class need to be cut.
A normal person would at least be embarrassed by all this. But Alan Greenspan has never been a mere mortal, has he?
POSTSCRIPT: Billmon has a Lou Dobbs interview with David Cay Johnston that spells out the whole shell game in illuminating detail.