>> That "gobbledegook" is not something that can reasonably be set aside
In today's testimony, when Schumer was trying to coerce Greenspan into saying what he wanted to hear, Greenspan really got to the heart of the matter. And media reports notwithstanding, it is difficult for me to envision a more ringing endorsement of what Bush is ATTEMPTING to do in the face of this partisan opposition.
Greenspan was clear about the magnitude of the problem. When Schumer proclaimed that "Nobody disagrees with that [the need for change]" he was wrong. Democrats EVERYWHERE disagree. And a ton of them are on this very thread. Absolute denial that this darling of liberal social programs has literally fallen apart at its seams.
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SEN. CHARLES SCHUMER (D-NY): Well, once again, Mr. Chairman, thank you for your erudition on this, which leaves us all better educated and maybe more confused, too.
I'd like to go back to these accounts and Senator Sarbanes' questions. You said you can't really tell if net savings will increase or decrease with this private -- a private account system that draws money from the existing Social Security system, because you don't know if the markets have -- how much they have discounted, if at all, the future obligations that we have.
MR. GREENSPAN: If I may, the fact -- whether it actually increases savings or not is a fact independent of what people's opinions are.
SEN. SCHUMER: I agree.
MR. GREENSPAN: So it's not the market. I think the problem here is that we have got a system in which, starting from scratch --
SEN. SCHUMER: Yeah, but for now --
MR. GREENSPAN: -- forced savings will be pay-as-you-go all the time.
SEN. SCHUMER: Right. Right. But a transfer, which is proposed now, is a different issue.
MR. GREENSPAN: Exactly.
SEN. SCHUMER: And we don't know how the markets will regard that transfer.
MR. GREENSPAN: Exactly. Yes.
SEN. SCHUMER: Okay. Now I want to take two cases: one they've discounted for; the other they have not. If they have not, and we go forward with this system that we hear about, where you transfer some money from the existing Social Security system to private accounts -- that would create a real problem, particularly, as you've mentioned, Senator -- to Senator Sarbanes, if the amount is a trillion dollars or $2 trillion or whatever. That's indisputable, I presume.
MR. GREENSPAN: It's a trillion dollars over 10 years we're talking about.
SEN. SCHUMER: Yes, yes, yes.
MR. GREENSPAN: Two trillion (dollars) is indisputable.
SEN. SCHUMER: Okay.
MR. GREENSPAN: A trillion dollars, I think, is right at the margin.
SEN. SCHUMER: Okay.
MR. GREENSPAN: But I don't -- I shouldn't say I know that. That's my assumption.
SEN. SCHUMER: Yup, understood. And we're all guessing here.
MR. GREENSPAN: Yeah.
SEN. SCHUMER: But that could be bad. Let's make no mistake about that.
MR. GREENSPAN: Could be bad, and it could be very good.
SEN. SCHUMER: Right.
MR. GREENSPAN: I mean, I think that my judgment is, we've got a problem in the -- that the existing pay-as-you-go system is not working, and we have to change it and --
SEN. SCHUMER: Well, nobody disputes that.
MR. GREENSPAN: So we have to change it.
SEN. SCHUMER: Yeah.
MR. GREENSPAN: And the question is how.
SEN. SCHUMER: Well, nobody disputes that we need some change. But it seems to me if the markets have discounted all of this, then it doesn't do any harm, but it doesn't do any good, because net savings is not increasing, as you said before. If the market has not discounted a rather large amount of debt being added to the existing debt -- obviously 15 or 20 years ago, this wouldn't have been a problem -- then we have real trouble.
MR. GREENSPAN: No, but if you move --
SEN. SCHUMER: So it's not win versus lose. It's either lose or stay static.
MR. GREENSPAN: No, because if you begin to move significant parts of the existing social insurance system into accounts which begin to create full funding, whereas left where they were, they won't, then you do increase national savings over time.
SEN. SCHUMER: But that's a huge if --
MR. GREENSPAN: Well, no, it's -- no --
SEN. SCHUMER: -- because it will only increase full funding if you dramatically cut a benefit. You have to do other changes than simply move one to the other. What we're trying to get at here is not the overall change that is needed -- and I don't think anyone disputes what you say -- but whether setting up a private account under current conditions, not starting from scratch --
MR. GREENSPAN: No, I'm --
SEN. SCHUMER: -- does anything to alleviate the problem.
MR. GREENSPAN: In and of itself, it surely doesn't alleviate the current problem.
SEN. SCHUMER: Right.
MR. GREENSPAN: Actions have to be taken.
SEN. SCHUMER: Exactly.
MR. GREENSPAN: I'm merely saying that it is -- that if you move to private accounts and --
SEN. SCHUMER: And --
MR. GREENSPAN: -- the financial markets are -- have not -- and the financial markets have at least partially discounted the contingent liabilities --
SEN. SCHUMER: Right.
MR. GREENSPAN: -- then you are in net plus --
SEN. SCHUMER: Right.
MR. GREENSPAN: -- because then you have the capacity --
SEN. SCHUMER: Understood. Okay. But if they haven't, you're not.
MR. GREENSPAN: That's correct.
SEN. SCHUMER: Okay. So it seems to me that what you really are advocating here, without saying it, which would truly increase net savings, is what is called around here Social Security Plus: fix Social Security on its own, and if you want to do private accounts and increase net savings over the present system, you do those in addition, whether it's forced savings or greater incentives, which 401(k)s or whatever mentioned; that -- wouldn't Social Security Plus -- in other words, fix the present system and then do the private accounts, not in replacement but in addition, do more for net savings?
MR. GREENSPAN: Well, it depends on how you finance them. In other words, the question here is, if you're going to expand 401(k)s, I think that's a desirable thing to do.
SEN. SCHUMER: Exactly.
MR. GREENSPAN: If you're going to set up another program which is an entitlement, which the --
SEN. SCHUMER: No, no, no, I'm just saying a 401(k) -- the first. I'm saying the first. That will more to increase net savings than simply shifting some money from the present system to a so-called private account. I think that's indisputable.
MR. GREENSPAN: Well, no, 401(k)s are private accounts. So --
SEN. SCHUMER: I understand, but in addition, as opposed to replacement --
MR. GREENSPAN: It --
SEN. SCHUMER: -- because you'll have more net savings.
MR. GREENSPAN: Yeah. No, no, I'm not disagreeing with you.
SEN. SCHUMER: Okay.
MR. GREENSPAN: I say that that's correct. I just want to make sure that you're not talking about a new entitlement --
SEN. SCHUMER: No, I am not. And furthermore, we'd have a(n) easier time fixing Social Security if our debt went down. It would have been easier to fix it six years ago or in 1983 than it is today, because one of the great problems is all the debt we have right now. Isn't that fair to say, too?
MR. GREENSPAN: I think that's fair to say.
SEN. SCHUMER: Okay.
Let me tell you just -- I know my time is up -- it seems to me that what you're saying here is that moving to the system that's outlined -- that the president may propose is risky.
It's risky because we don't know what the markets have -- what the markets will do if they see it, and at the same time it does not increase overall net savings in of itself. And I know you don't want to say that -- (chuckles) -- but it seems to me it's sort of inevitable and inexorable from what you have outlined here in terms of those two parts. Where am I wrong there?
MR. GREENSPAN: Senator, it is risky doing nothing. It is risky -- doing any other solution to this is risky. We've got this huge hole in our long-term funding problem, and I know of no way to resolve it without some risk. It's a question of which risks are more likely to be --
SEN. SCHUMER: It just seems to me what you're saying is just on the way the privatization accounts are proposed, the risks far outweigh the benefits unless we do something else with it.
MR. GREENSPAN: Well, that's the reason why I think that starting slowly and finding out how it works is a very good direction in my judgment because if it turns out to be something which creates problems or if people don't like the thing -- remember, it's a voluntary issue, and they may just choose not to take it. My own judgment is I think when you have assets which you own, which you can bequeath to your children, and which have your name on it, I think that is a highly desirable thing because you give wealth basically to people in the lower- and middle-income groups who have not had it before because, remember, these private accounts, even though they are forced savings, are indeed owned by the people and they have wealth which they probably would not have had before, so that I can conceive of these being extraordinarily popular accounts. And if they are, I think it has a very important -- it's a very important addition to our society because, as you know, I've been concerned about the concentration of income and wealth in this nation, as indeed the senator, your colleague, has as well. And this, in my judgment, is one way in which you can address this particular question. |
