The rumor last week was that Greenspan might quit. Like Enron, Greenspan had connections
with the Bush White House. They all seemed to be buddies.
During the Clinton years, the economy prospered and Greenspan could do no wrong.
Most investors, analysts and just about everyone else thought he was great.
Well, the economy isn't so hot right now. We are in a recession. People begin to distrust the
market and they are probably going to end up hating auditors b4 all this is over because the
auditors have screwed them, especially with Enron which is the largest company in the
US to ever go bankrupt. It went bankrupt on December 2.
I like this op-ed columnists because he wrote many articles last summer about social security,
the economy and Bush. In this article, he talks about Greenspan.
January 8, 2002
The Quiet Man
The New York Times
By PAUL KRUGMAN
On Sunday newspapers
headlined George W. Bush's
declaration that future tax cuts
would be canceled "over my dead
body." But the only news there
was Mr. Bush's choice of words -
words he hasn't repeated,
probably because his aides
realized that they didn't sound
very presidential, and were in
poor taste in light of recent events.
The interesting news story on economic policy, it seems to
me, involves someone else - and it involves his silence,
not his words. Whatever happened to Alan Greenspan, the
high priest of fiscal responsibility?
About Mr. Bush: surely nobody expected him to give an
inch, even though the surplus projections that were used
to sell the tax cut have turned out to be nonsense. The
Bush administration operates on the principle of "no
enemies on the right"; it also operates on the principle
that Mr. Bush is infallible. Whatever policies he may have
proposed in the past, his aides always insist that they are
perfectly suited to the present - indeed, were devised
with the present situation in mind. It's actually quite
funny, though nobody dares say so.
Last month, for example, Karl Rove explained that the tax
cut, although originally proposed amid an economic
boom, was designed to cope with the current recession.
"All the signs were there in the second, if not the second,
the third quarter of 2000," Mr. Rove said. When a
questioner gently pointed out that Mr. Bush had laid out
his tax plan way back in 1999, Mr. Rove brushed him
aside.
And since Mr. Bush is infallible, why should he ever
reconsider his decisions?
But back to Alan Greenspan. A year ago Mr. Greenspan
gave the new Bush administration decisive aid in its push
for a large tax cut. Worrying that the national debt would
be paid off too quickly, he urged Congress to cut taxes in
order to put the budget on a "glide path" of gradually
declining surpluses.
Some glide path; more like a nosedive. In 2000 America
ran a record surplus; now, analysts from both parties
agree that the federal budget will be in deficit for at least
the next several years. They still project surpluses for late
in the decade - but if you believe those projections, I've
got some Enron stock you might want to buy.
Mr. Greenspan ought to be upset. It's not just that during
the Clinton years he became an icon of fiscal probity; the
sudden plunge back into deficit undoes his own
handiwork.
You see, back in the early 1980's, before he became Fed
chairman, Mr. Greenspan headed a commission that was
supposed to secure the future of Social Security. The
main result of that commission was an increase in payroll
taxes, even as Ronald Reagan was cutting income taxes.
The purpose of this regressive tax increase - payroll taxes
fall most heavily on low- and middle- income families -
was to generate a surplus that would, in turn, make it
easier for the federal government to pay benefits to an
aging population.
But now, thanks to the disappearance of the budget
surplus, the excess revenue collected by the payroll tax
isn't being used to acquire assets, or even to pay down the
federal debt; it's being used to cover deficits elsewhere in
the budget. We're not talking small numbers here; only
about 70 cents of each dollar in Social Security revenue is
used to pay current benefits. In effect, the other 30 cents
has now been expropriated for other uses - mainly tax
cuts for the richest few percent of the population.
Was this what Mr. Greenspan intended - to raise taxes
on the poor and the middle class, so that they could be
cut for the rich? If not, why doesn't he say something?
After all, a word from him could alter the landscape of
economic debate, just as it did a year ago.
It's true that to give that word Mr. Greenspan would have
to admit, at least tacitly, that he was wrong last year. But
he's not a politician up for re-election - and if he's
worried about his reputation, he should realize that if he
continues to be silent history will not judge him kindly.
Right now the provisional verdict is that he was a
hypocrite: he sternly demanded fiscal responsibility while
Democrats were in office, but had no complaints -
indeed, acted as an enabler - as a Republican
administration quickly squandered the fruits of all that
austerity.
That verdict doesn't have to stand. All it would take would
be a few carefully chosen remarks. I'm all ears. |
