Friday, February 18, 2005

Sense of Unsustainability

Via Needlenose I saw this Reuters article about Greenspan arguing for privatization, not on grounds of increased solvency or improved retirement outcomes, but on ideological grounds:

U.S. Federal Reserve Chairman Alan Greenspan embraced President Bush's vision of an "ownership society" on Thursday, saying private Social Security accounts could foster feelings of wealth among poor Americans.

. . . While he did not specifically endorse Bush's plan and admitted private accounts, in and of themselves, would not improve Social Security's shaky finances, he said such accounts could importantly create "a sense of ownership."

"These accounts, properly constructed and managed, will create ... a sense of increased wealth on the part of middle and lower-income classes of this society, who have had to struggle with very little capital," Greenspan told the House of Representatives Financial Services Committee. (all emphasis is mine)

So Alan Greenspan is trying to argue that private accounts will be treated as collateral for increased borrowing by a segment of the American population that is already up to their eyeballs in debt, as the only way that the typical hourly worker can feed their consumption growth is through increased debt or the drawing down of assets as real wages for this segment of the population are not increasing.* However given the curlicues of the probable Bush plan, the private accounts do not offer any new ability to pay off or maintain debt.

Therefore Alan Greenspan is advocating yet another spectre to continue the asset based recovery that we have been experiencing over the past four years as the housing market is starting to cool off, the stock market is moving consistently sideways, and we are seeing significant price pressure from commodities. Alan Greenspan is continuing his assault on the typical American for in 1983 he had us overpay our Social Security taxes to theoretically make it easier for my parents to retire, in 1998 he opposed the Clinton plan to seek higher rates of return by putting OASDI TF revenue into the market managed by the government in order to moderate risk because that would be socialism, encouraged the destruction of the surplus that was built up partially by his recommendation, and now is looking to screw the typical Americans by destroying the sole remaining guarantee of a minimally acceptable retirement lifestyle. So thanks for nothing Mr. Greenspan. Stick to managing the Fed, instead of being a hack in pursuit of a Randian agenda.

*Data source: BLS CES 0500000049 AVERAGE HOURLY EARNINGS, 1982 DOLLARS

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