Krugman: Greenspan's Betrayal

[nostamj]

http://www.nytimes.com/2004/03/02/opinion/02KRUG.html

The Bush White House has made it clear that it will destroy the careers of scientists, budget experts, intelligence operatives and even military officers who don't toe the line. But Mr. Greenspan should have been immune to such pressures, and he should have understood that the peculiarity of his position — as an unelected official who wields immense power — carries with it an obligation to stand above the fray. By using his office to promote a partisan agenda, he has betrayed his institution, and the nation. 

[sadiesworld]

1. Gotta love Krugman...

now, if he could only reexamine his support of free trade...

[KittyWampus]

3. Why? So We Could Move Backwards?

The concept behind Free Trade is sound... it is the implementation that is flawed.

No one said the Evolution, Progress and GROWTH is easy, painless or without mistakes.

Economists like Krugman are valuable for presenting us with the Big Picture unalloyed with emotionalism.

[sadiesworld]

5. Sorry, all I see at this point is the transfer of the wealth of the middle

class. We could export every job in America and not make much of a dent in world poverty.

[rman]

18. i don't think Krugman supports the current implementation of free trade,

but he does support the principle of private enterprise.
I think most lefties and moderate conservatives see it that way.

[evil_orange_cat]

20. I agree with you... Free Trade isn't inherently evil or bad...

as with anything, it just needs to be implemented in a fair way.

[Romberry]

24. Krugman already qualifies his support of free trade

He has pointed out often that what we have now is not "free trade" and the consequences of pretending that it is are not good for our economy. Krugman's thinking on this issue has evolved quite a bit in the last ten years. Sometimes he sounds like a much more nuanced version of Howard Dean.

[Cassandra]

2. Why has it taken so long...

for someone to mention what I remembered; that the surplus was not the result of rich people paying taxes but the raise in payroll taxes on the poor and middle class. Then these creeps turn that money over to those paying income taxes, not to those paying mostly payroll taxes. If that isn't reverse Robin Hood, nothing is.

[charlie]

4. $1.8 trillion, to be exact

That's how much wage earners have paid over what was necessary to fund SS payouts since the payroll tax increase in 1983. All gone now, disappeared in a poof of tax cuts.

[napsi]

6. Greenspan

As a member of the "evil rich" but a loyal democrat when it comes to social and environmental issues I would like to propose this idea. I'm sure I will get lots of hate mail on this one:

I would be willing to give up all entitlement to Social Security benefits and the Federal Govt can keep all I have paid up to this point of my life (it's considerable) if they would allow me to opt out of the system now. I am 42 and I know without a doubt I can supply for my retirement without the help of Social Security.

Do you guys think this would be a viable plan? That is to let those of us who want to opt out to do so? This would mean we would have no "right" to claim benefits at 62, 65, 70 or 72....period.

I think I know the response. I will be waiting to get lambasted.

[Cassandra]

7. To quote you; "Be careful what you wish for, you might just get it."

If I were you I'd get that crystal ball shined up to make sure you don't invest in any future Enrons, or else your certainty that you "can supply for my retirement without the help of Social Security" might turn out to be a sad mistake.
Aside from that, it is in the interest of the entire country that we don't have poverty stricken elderly sleeping in the streets, whether that turns out to be you or someone else.

[napsi]

14. Regarding Enron

I don't fall in that category, not because I'm any "smarter" than the ones who were taken by those sleazballs but because I don't put my assets at risk like that. I have always stayed in real estate (God isn't making anymore of this stuff) and I never put more "out there" than I can afford to lose. Gambling isn't my style unless I drank to much at the craps table or blackjack table.

My point is this: Think about the number of people in this country who would be willing to do this. Perhaps there should be some kind of limit based on your assets or the amount you have paid in. Maybe you have to "put in the system" a certain amount before you can opt out. Remember, anything you paid....you can't get back. I'm trying to find a way to stop SS from paying people who won't need it but yet reward those people who have planned for the golden years.

I'm putting on my helmet.............

[JNelson6563]

8. No lambasting here

I don't see anything wrong with what you propose. What you have paid in by age 42 couldn't be enough for someone who is wealthy (and not greedy) to miss too terribly. Payroll taxes only apply to limited amount of income anyway. ($60,000 these days, isn't it?)

I have often wondered about this sort of thing myself. My mother-in-law is now very well off--she inherited a handsome sum. She doesn't need SS or Medicare really. She collects them of course but would be more than comfortable without them. I remember a few years back she had an earlobe fixed, the hole for earrings had streched badly. She told me the doctor had to do it in the hospital and not his office "or medicare wouldn't pay for it". That kinda bothered me. Still does.

Julie

[recidivist]

10. Perfectly viable plan.

Sooner or later, we ARE going to shift to a fully-funded retirement system, simply because a pay-as-you-go transfer system makes less and less sense as the worker-to-retiree ratio continues to drop. A pay-as-you-go social insurance concept may have made sense way back when we had 15 or 20 people paying for each retiree, but it is a wretchedly bad way to do business when the ratio drops to 3-1 or 2-1.

In the long run, given the realities of longer lifespans and lengthy retirements, all of us would enjoy significantly higher retirement incomes in a fully-funded system, which would permit investment earnings to compound over time.

The transitional problem, of course, is that we still have to pay the Social Security System's massive unfunded liabilities. Those debts have already been incurred; they are the legacy problem of the existing system, not of a new, fully-funded system. They have to be paid one way or the other. The sooner we start facing up to the task, the better.

[KharmaTrain]

11. Being Wealthy Isn't Evil

I'm in a similar situation as you are. I've paid in substantial SSI payments since I collected my first paycheck in 1972 and am still paying in. I'm not as drastic as you are to say let's opt out, but I say that there has to be a re-examination of how the system is set up and who benefits and how...also to understand what SSI really is.

This issue always gets messed up when people assume that Social Security is retirement. It isn't, it's a Supplement...supposedly combined with your other investments and savings to live comfortably once you are no longer able to work. Remember, this was set up in the wake of the Great Depression where millions were hungry and dying...a dire situation we fortunately haven't revisited. Also, that SSI was originally intended to assist on medical...later replaced by Medicare...this in an era where only the very rich could afford that new-fangled health insurance.

Since there is a maximum contribution...and I have a feeling you're at that level, everything you earn and invest above is a realm many who scrape paycheck to paycheck can't phathom. A change in SSI...even it's total disolution (the ultimate GOOP dream) won't hurt you or I, but it will to millions of hard-working people, who vested into this system decades ago with a promise of a "secure" life after the age of 65. This life, to my interpretation are the basics...health, shelter, food and dignity. The destruction of SSI is a disgrace to these people.

Personally, I'd forgo my share if it meant mine went to assisting two elderly now to enjoy some peace in their final years. Guess I just have different priorities.

[napsi]

15. I would gladly forgo my share

After 25 years in the "system", the last 17 paying the maximum I believe there has to be some kind of "fix". I'm sure there are many people here who think I should continue to pay and opt out anyway. That's just plain punishment IMHO. My mother collected SS and MED until she passed away. She didn't need it but my father had paid for 45 years and he died at 66. She was entitled to it . I'm saying take me out of the system, keep my money. I will not claim it at retirement.

[recidivist]

16. Re: Social Security as retirement.

Social Security needs to change. As you correctly point out, it was not initially conceived as a retirement system. Many people, nonetheless, have come to rely on it for retirement, and it is woefully inadequate to the job. It should be modernized so that it does, in fact, serve as the foundation for a coherent (and much more generous) national pension system. Fortunately, this is not hard, once we get beyond the kind of mindless fetishism that insists that FDR was some sort of demigod whose handiwork must never be amended.

Social Security was established in 1935 in a society in which the modern concept of retirement scarcely existed. People expected to work until they died, which was not difficult since most people didn't make it to 65 anyhow. The Social Security retirement age, in fact, was set at an age that most would not attain as a quite deliberate exercise in cost control.

Under these circumstances, one of the great risks of old age was outliving one's ability to work. If that happened, you were thrown back on your savings, or on family, or charity. (Of course, medicine was sufficiently primitive that death usually followed infirmity fairly quickly, so this problem tended to be limited in duration.) Social Security was intended as a modest protection against utter destitution for such "unfortunates." Hence the term "social insurance;" the hazard being insured against was excessive longevity.

Today, of course, most folks who reach adulthood will make it well beyond 65, and modern medicine keeps most of us alive well beyond our ability (or desire) to do any strenuous work. The old social insurance concept simply does not comport with modern realities. Social Security needs to change. This is not surprising; very few instutitions, products, or services from 1935 survive into the modern era unchanged. There is no reason to suppose Social Security is somehow different.

When it was created, Social Security had 40-plus workers (I'm too lazy to look up the exact figure) contributing to the upkeep of each retiree. Pay-as-you-go made some sense. Today we are dropping like a rock to 2-1. Pay as you go is now insane.

When it was created, the Social Security tax was -- what? one percent? (Again, I'm not in the lookup mood at the moment.) Today it's 15.3%. Take out the Medicare, survivors, and disability components, and the tax is still over 10% for the core retirement function alone. In return, Social Security pays a barely poverty level stipend. Pretty crummy deal.

In a fully invested system, 10% of income over an entire working life would pay EVERYONE a significantly higher pension. It would allow most people to comfortably maintain their pre-retirement standard of living, or to retire early. It would allow people of modest means to accumulate estates and would, over a generation or two, significantly democratize the distribution of wealth in this country. All these benefits, however, are foregone if we refuse to make the change.

What was a progressive reform in 1935 is a costly anachronism today. It needs to change. The change can be done on a voluntary basis. Allow people who want to shift to a fully-funded plan to do so. Everyone under the age of 35 with a room temperature or better IQ will do so immediately, as will a very substantial proportion of the 35-50 years olds. The over-50's are probably locked in to the current system, so a transitional financing mechanism must be devised. This is doable. The longer we wait, the more expensive it gets. The sooner we get started, the better.

We are making a BIG mistake if we let the Republicans own this issue. A majority of Americans now favors some investment option in Social Security. Among the under-40's, it is a very substantial majority. Among the 50% of the population that already has an IRA or 401(k) and thus understands what the new system would look like, support for reforming Social Security is overwhelming.

This is not some overriding moral question where the losing side may, perfectly rationally, feel an obligation to fight to the bitter end. This is a prudential question of how to most sensibly arrange a pension system. I am for higher retirement incomes and estate creation for middle and working class families, and I am gratified that the younger generations seem to be grasping these opportunities. As a Party, we should be seeking to lead this evolution, not cling blindly to the losing side.

[KharmaTrain]

21. A Question Of Limits

Thank you for amplifying the initial designs of SSI. This has been overpoliticized over the years by both sides into the misconcieved retirement fund many think it is.

When the concept of privitization first came out, I liked many of the aspects...since I think it directed toward the establishement of a national pension as opposed to retirement system. The concept that you paid a certain percentage of your income (a smaller percent than currently withheld) and through privitization and other means, that the individual would direct, you could get a higher interest rate or use that money for a loan. Somehow that idea got hijacked and politicized.

What we need to decide is a two-fold question. First, is there a basic standard of living our government is obliged to give citizens? Are there minimums? Who decides? Then there's the equity of a system...where those who are the most in need are never the ones who are most vested.

I applaud your thoughts of looking outside the current SSI or nothing position a lot of Democrats cling to...and yes, one I think has done more to hurt us than help...especially those now who need assistance and we have a regime that spends not only what it brings in, but tax revenues for years to come on its own corporate welfare system.

[shrike]

13. I have no problem with you opting out

or anyone else who wishes to. But for most people this is not an option.

[priller]

17. 'Means testing' -- that's what your idea is called

It's a very sensible idea that has been bandied about for years -- that if you're already well off, then you get less (or no) SoSec payments. But no politician will touch it.

[KharmaTrain]

19. You're Right...Especially The GOOP

The big hypocrisy in this SSI takeaway that's being proposed is that those who are well off can and will retire at 65 or earlier and start to cash into the system...taking their full share...an amount that was is far less proportion that their overall income. For many this is "mad money" per se...you've supposedly invested wisely long before retirement and thus the SSI money you get upon retirement is additional...as usual the rich getting richer.

While the Repugnicans would love for me to take my money out of SSI and dump it in one of their investment banks...or even worse...have your funds included as well to benefit their rich buddies. Nope, no will do. However, I think that those who are promised that they will have money waiting for them at age 65 should be entitled to every penny...not have to take less or work longer. If that means it comes out of those who can afford, that's where I'm ready to pony up.

No politician would dare touch redistribution of SSI and any "reform" is always going to be a band-aid (I'm surprised the last revisions lasted 20 years) based on population and the economic condition of the country. Again, I never banked on retiring on SSI or that the system would be solvent...now my best scenario is the system not collapsing in my lifetime.

[Romberry]

25. You don't understand what Social Security is.

It isn't a "retirement plan", it's social insurance and it provides for a lot more than just old age pensions. SSDI provides some (meager) income for those who become disabled. Survivor's benefits provide an income to children whose parents die. And on top of that, what you contribute towards Social Security isn't "yours". Your contributions are supposed to go to pay current benefits for people who already paid for those who came before. Allowing people to "opt out" would require an immediate transfer of perhaps a trillion dollars to cover the hole created by transitional costs.

Now that Greenspan's shell game has been revealed for what it is and congress has demonstrated beyond all doubt that they cannot keep their hands off of the trust fund surpluses, I would support a reduction in the FICA withholding to return to a true "pay as you go" system. With the huge surplus already paid in, that leaves Social Security solvent for the next 40 years and when the time comes they can just raise withholding to cover the shortfalls again.

[JNelson6563]

9. The Price of Loyalty

Anybody read Suskind's book on O'Neil? This provides great insights into this very topic. I'd wager Krugman read it. I have to say I view O'Neil much differently. OTOH it confirmed what I suspected about the boy king and his court.

Julie

[indepat]

12. Greenspan is but one of a flood tide of high ranking officials

in all three branches of the Federal government who wield great to immense power, but who have betrayed his/her institution, our nation, and the people through promoting a divisive, destructive and radical partisan agenda: may his name be high among those names that live in infamy for as long as this Republic shall survive.

[ignatius]

22. This man is an unsung hero, who day after day, goes after the

corruption and lies that this administration sells to the taxpayers every day.

I work in a brokerage house and believe me, the brokers are salivating at the chance to invest those "privatized" social security funds. We see what happens when the utilities were privatizes,,looting and plindering suddenly become legal.

Greenspan is a tramp, a common whore. I remember his mantra for all of the 90's under Clinton..cut the deficit, rates will go down, and we will prosper. He did, they did, and we did.

In early 2000, he suddenly did an about face and backed the tax cuts..give the money back to the people. What he forgot to mention was they were also the "peoples" obligations on the debt side and suddenly the surplus was not only gone, but was devastated,looted, and plundered by a group of right wing parasites.

I remember when the payroll taxes were raised, under Reagan. Ironically, it was a huge tax increase under the "lower taxes" president, but since it was regressive and didn't burden his rich white buddies, I guess it didn't count, at least in their greedy, little minds.

This article needs to be copied and put in bookstores, grocery bulletin boards, libraries,churches...etc...anywhere we commoners congregate. We paid for social security, now leave it to hell alone!!!

[Centre_Left]

23. COLA Adjustment

Greenspan recommended adjusting the COLA adjustment because it causes social security benefits to rise at a rate higher than inflation. Even Pat Moynihan supported a similar proposal.

[Romberry]

26. Nonsene. COLA is pegged to inflation

That's what COLA means: Cost of Living Adjustment

If anything, COLA is too low. By law the COLA adjustment is held just under the CPI and the CPI already understates inflation in the cost of living since it does not account for things like housing and energy costs.

[muriel_volestrangler]

29. According to this, the CPI includes housing

shelter: 32.9%
fuel and utilities: 4.7%

http://www.bls.gov/cpi/cpiri2003.pdf

[newyawker99]

28. Hi Centre_Left!!

Welcome to DU!! :toast:

[mrgorth]

27. THIS MIGHT BE THE MOST IMPORTANT THING KRUGMAN HAS DONE

We need to get this piece in everyone's face. Noone knows how this stuff works.