Has Greenspan overstepped?

iVillage Member
Registered: 04-16-2003
Has Greenspan overstepped?
8
Wed, 02-25-2004 - 11:42am
As Chairman of the Federal Reserve, Granspan can certainly suggest the deficit should be curbed, but should he say how? His domain is monetary policy not fiscal policy.

Greenspan Urges Congress to Reign In Deficit

By THE ASSOCIATED PRESS



Filed at 10:37 a.m. ET

WASHINGTON (AP) -- Federal Reserve Chairman Alan Greenspan urged Congress on Wednesday to deal with the country's escalating budget deficit by cutting benefits for future Social Security retirees rather than raising taxes.

In testimony before the House Budget Committee, Greenspan said the current deficit situation, with a projected record red ink of $521 billion this year, will worsen dramatically once the baby boom generation starts becoming eligible for Social Security benefits in just four years.

He said the prospect of the retirement of 77 million baby boomers will radically change the mix of people working and paying into the Social Security retirement fund and those drawing benefits from the fund.

``This dramatic demographic change is certain to place enormous demands on our nation's resources -- demands we will almost surely be unable to meet unless action is taken,'' Greenspan said. ``For a variety of reasons, that action is better taken as soon as possible.''

Greenspan, who turns 78 next week, said that the benefits now received by current retirees should not be touched but he suggested trimming benefits for future retirees and doing it soon enough so that they could begin making adjustments to their own finances to better prepare for retirement.

But while Greenspan urged urgency, Congress is unlikely to take up the controversial issue of cutting Social Security benefits in an election year.

Greenspan suggested two ways that benefits could be trimmed. He said that the annual cost-of-living adjustments for those receiving benefits could be made using a new version of the Consumer Price Index called the chain-weighted index, which gives lower readings on inflation.

He also said that the age for retirement should be indexed in some way to take into account longer lifespans. He noted that presently the age for being able to get full Social Security benefits is rising from 65 to 67 as one of the changes Congress adopted in the mid-1980s, based on recommendations of a commission Greenspan chaired. In his testimony, Greenspan said Congress should go further and index the retirement age so that it will keep rising.

As he has in the past, Greenspan called on Congress to reinstitute rules that require any future tax increases to be paid for either by spending cuts or increases in other taxes.

While that would erect a high hurdle to President Bush's call for making his 2001 and 2003 tax cuts permanent, estimated to cost at least $1 trillion over a decade, Greenspan again repeated his belief that spending cuts rather than tax increases were the best way to deal with the exploding deficit.

While not ruling out totally the use of tax increases to deal with at least part of the looming surge in spending on Social Security, Medicare and other entitlement programs, Greenspan urged caution in increasing taxes.

``Tax rate increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base,'' Greenspan said. ``The exact magnitude of such risks is very difficult to estimate, but they are of enough concern, in my judgment, to warrant aiming to close the fiscal gap primarily, if not wholly, from the outlay side.''

http://www.nytimes.com/aponline/business/AP-Greenspan-Budget.html?hp

iVillage Member
Registered: 03-31-2003
Wed, 02-25-2004 - 12:48pm
Well, at least his analysis runs counter to the republican myth that deficit spending is not a problem.

Greenspan said "``Tax rate increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base,''

Sufficient dimension? Is he assuming that taxes would have to do all the work of paying for SS? Couldn't we raise taxes a reasonable amount, cut spending a reasonable amount and THEN screw SS recipients a reasonable amount?

"He also said that the age for retirement should be indexed in some way to take into account longer lifespans. He noted that presently the age for being able to get full Social Security benefits is rising from 65 to 67 as one of the changes Congress adopted in the mid-1980s, based on recommendations of a commission Greenspan chaired. In his testimony, Greenspan said Congress should go further and index the retirement age so that it will keep rising. "

Taking longer lifespans into account, could our parents claim us as dependants until we're 30? What if we still live at home? Or have alot of stuff stored in their basement?

iVillage Member
Registered: 03-18-2000
Wed, 02-25-2004 - 2:01pm

>"Taking longer lifespans into account, could our parents claim us as dependants until we're 30? What if we still live at home? Or have alot of stuff stored in their basement?"<



LOL

 


Photobucket&nbs

iVillage Member
Registered: 03-18-2000
Wed, 02-25-2004 - 2:39pm

>"Central bank chief says deficits could hurt economy, suggests cutting Social Security benefits."<


How about cutting

 


Photobucket&nbs

iVillage Member
Registered: 04-16-2003
Thu, 02-26-2004 - 10:38am
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Not possible; way to reasonable. I wonder if Greenspan mentioned SS to get a reaction from the public. I previously read statements that we should get the debt under control--but didn't get much play. Just think when Clinton left office a surplus was projected!!!

Sure we should be able to claim children until they are no longer dependent--Then they could claim us. HA

iVillage Member
Registered: 04-16-2003
Thu, 02-26-2004 - 10:43am
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Ah the poor businesses--sigh

What I would like to see is the sham loopholes closed. The corporate tax payments have been reduced from aboug 17% of revenues to 7%. Now that's a chunk of tax. Instead of chasing the middle class, the IRS should pursue the corporations and tax shelters of the wealthy--but that's more difficult and complicated.

iVillage Member
Registered: 04-16-2003
Fri, 02-27-2004 - 11:20am
Who benefits from SS? You think everyone benefits according to their contribution--Think again! This should be a national scandal!!!!!!

DOBBS: Federal Reserve Chairman Alan Greenspan so far has won little support for his proposal to cut the federal deficit and to cut future Social Security benefits. My next guest says a better plan would be to end what he calls tax breaks for the rich. David Cay Johnston is the author of the book "Perfectly Legal, The Covert Campaign To Rig Our Tax System To Benefit The Super Rich And Cheat Everybody Else." And he joins us tonight from Portland, Oregon. Good to have you here, David

Thank you, Lou.

DOBBS: This is class warfare stuff in a campaign year like this, as you well know. Let's back it up. What do you mean that the rich are being subsidized by Social Security of all things?

DAVID CAY JOHNSTON, AUTHOR, "PERFECTLY LEGAL": Well, in 1983 Alan Greenspan persuaded the Democrats who were in charge of Congress to overtax us on Social Security, that is to collect taxes in advance rather than on pay as you go system. The promise was that we would use the excess taxes to pay off the federal debt which was then about a trillion dollars. We have now paid 1.8 trillion dollars in excess Social Security taxes. This year the government will collect -- if you make $50,000, about $7,500 from you. It only needs 5,000 to pay current benefits. That other $2,500 wasn't used to pay off the federal debt, which is now 7 trillion dollars, instead it is being used to finance tax cuts for the super rich.

DOBBS: We're putting up a graph right now which goes to the -- to that issue. Precisely what you're talking about. Now, why in the world would FICA be limited at $87,000 of earnings, taxing -- taxation on $87,000? Why not carry that straightforwardly through for everyone at higher levels?

JOHNSTON: Well, it's limited to the 90 percent of wages in the country. And the theory is that that's as high a benefit as the government is going to pay. So your benefit caps out, that's why the tax stops. If we simply had a pay as you go tax and it stopped at that end, Lou, I don't think there would be an issue. Since we were told you have to pay in advance. Of course a tax paid in advance costs you a lot more than when you can defer off into the future. That you are going to pay in advance for the benefits.

And now that money has not been spent to pay off the debt. Now Mr. Greenspan says you are not going to get those benefits but we should not raise taxes on those that make millions of dollars a year. It seems to me what Senator Daniel Patrick Moynihan predicted in 1983 has come true. He said this was thievery and the middle class were going to have their pockets picked by the rich.

DOBBS: Indeed, with that analysis that is what is happening. And the middle class at this point, hardworking men and women in this country are no longer being surprised by some of the pressures, forces that are working against them. What is your best judgment for a solution?

JOHNSTON: Well, in the case of Social Security, if we were to go back to pay as you go, people making $50,000 a year would have $48 a week more in their pocket, particularly if we took it all out of the side paid by the worker. So we cut that in half, and the max instead being dollar for dollar by your employer, it would be two dollars to one dollar. People earning $50,000 would have $48 a week more in their pocket. They could choose whether to save that money or whether to spend that money. But it would be their money and their choice.

DOBBS: I'm sorry, go ahead.

JOHNSTON: It would also mean, however, that the federal government would either be spending vastly more than it is taking in, a couple hundred billion dollars a year. We would either have to deal with that or raise taxes on people who have higher incomes. DOBBS: Let's put the graph up. We have a graphic of this from your book that we want to show you maxing Social Security taxes per person doing exactly what David suggested. This is a remarkable -- to look at the income growth from 1970 to 2000, for the bottom, if you will, 99 percent of this country versus the top 100 -- one percent, is staggering. I follow these trends rather carefully but I had no idea of the discrepancy there.

JOHNSTON: If you chart, Lou, the increase in income for the bottom 99 percent of Americans over that 30-year period, for each dollar that each person got in increased income, and the average was $2,700, less than a hundred dollars a year, you made it one inch high for the top one-one-hundredth of 1 percent, or 27,000 people, it is 625 feet high. 625 feet to one inch.

DOBBS: And the solution is there, the fact that Alan Greenspan, the fed chairman would raise the issue, I think, is commendable. The suggestion in my opinion that the first solution should be sought is to cut the benefits of future retirees is reprehensible. What is your reaction?

JOHNSTON: Well, we can choose in America, if you want, to have a system in which the middle class and the upper middle class, people making $30,000 to $500,000 a year subsidize people who make millions of dollars. And if Americans want to vote for that they should do it.

I just don't think, Lou, that Americans would have gone for this if they had known what is happening. And since it was Mr. Greenspan who said pay your tax in advance and now he says, no, we're not going to give you the benefits, but we can't raise taxes on the rich. That seems to me morally troubling.

DOBBS: Let me ask the question that everyone listening and watching -- listening to and watching you right now wants to know, that $1.7 trillion in extra collections on Social Security, where is their money?

JOHNSTON: We spent it. We spent it on tax cuts for the super rich. In 1993, the 400 highest income people in America paid 30 cents on the dollar in income taxes. By 2000 they were down to paying 22 cents on the dollar. Had the Bush cuts been in effect they would have paid 17 cents on the dollar. Everybody else in America went from 13 cents up to 15. So the super rich in America have more of their money after taxes and everybody else has less.

DOBBS: David, do you ever share with people your political affiliation?

JOHNSTON: Well, as a matter of public record. I'm a registered Republican.

DOBBS: I just wanted to get it on the record, but I wanted to be sure that was okay with you. David Cay Johnston your presence here tonight is greatly appreciated. We thank you. I want to say I don't often do this. I would like to say to our viewers that his book, "Perfectly Legal," is definitely worth your read. This is a complex issue, but what he reveals in that book is amazing, as you just heard part of it. David Cay Johnston. The book is "Perfectly Legal." Thank you for being with us.


http://edition.cnn.com/TRANSCRIPTS/0402/26/ldt.00.html

iVillage Member
Registered: 03-18-2000
Fri, 02-27-2004 - 12:30pm

 


Photobucket&nbs

iVillage Member
Registered: 04-16-2003
Fri, 02-27-2004 - 8:05pm
Dionne asks a very important question in the following excerpt--See last sentence.

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And, yes, the tax cuts have a lot to do with its disappearance. In an important article in the New Republic, Jonathan Chait notes that if you add up the cost of all legislation under Bush -- measured as either new spending or lost revenue -- the tax cuts account for 55 percent of the total cost. Defense, homeland security and international aid account for 30 percent. New entitlements count for 13 percent. The tiny percentage left over is for everything else.

Thanks to Alan Greenspan, we may have a debate over our priorities. What will it be: Going with Bush and repealing all inheritance taxes on large fortunes, or cutting Social Security for living, breathing seniors? Rolling back Bush's tax cuts for the very wealthy, or cutbacks in Medicare? Big tax breaks for dividends, or a higher retirement age? In short: Modest changes in entitlement programs to keep them solvent, or big cuts to cover the cost of our current profligacy?

Greenspan is not an elected official. But he has reminded us of what elections are supposed to decide.

http://www.washingtonpost.com/wp-dyn/articles/A10828-2004Feb26.html