Offering frequent news and analysis from the majestic Evergreen State and beyond, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Friday, February 18, 2005

Greenspan Exposes the Flaws of Bush's Social Security Scheme

Federal Reserve Chairman Alan Greenspan yesterday admitted that the president's current Social Security privatization plan has major flaws.

Although the mainstream press focused on Greenspan's theoretical support for private accounts, his testimony revealed deep reservations about the transition costs and his belief that Bush's plan will do nothing to alleviate long-term funding problems in the system.

Greenspan admitted Social Security privatization will not increase overall national savings. During his testimony, Greenspan argued that the key to fulfilling our commitments to future retirees is to increase national savings.

Senator Jack Reed (D-RI) asked Greenspan, "Would you also agree…that the private accounts will basically leave national savings unchanged since the government is borrowing money to give to individual citizens to invest in the market?" Greenspan replied, "Yes, I do."

Greenspan believes private accounts will do nothing to save Social Security. Greenspan expressed concern about Social Security's long term financial stability under privatization schemes.

Sen. Chuck Shumer (D-NY) asked if "setting up a private account under current conditions, not starting from scratch...does anything to alleviate the problem." Greenspan replied that setting up private accounts "surely doesn't alleviate the current problem."

Greenspan would not endorse borrowing trillions of dollars to finance Social Security privatization. Notably absent from Greenspan's theoretical defense of private accounts was any solid defense of the president's plan to borrow trillions to finance the phase-out of Social Security.

He warned of negative consequences from borrowing huge sums of money and stated, "We don't know how the markets respond to that…And if we were to go forward in a large way and we were wrong, it would be creating more difficulties than I would imagine."

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