Alan Greenspan wants Congress to rein in its spending and he thinks reducing Social Security costs is one of the best approaches available.
Greenspan in a February speech called on Congress to restrain the growth of the federal budget, both by reinstating pay-as-you-go rules imposed by Congress in the 1990s, rules that expired in 2002. According to the Washington Post, "the rules essentially required that almost any tax cut or spending increase be matched by an offsetting budget change of equal value so there would be no net increase in the deficit. They also included caps on increases in discretionary spending."
Just as importantly, he said, Congress needed to find a way to curb growth in Social Security and Medicare, saying Congress should consider raising the retirement age and changing how cost-of-living increases were calculated.
While much of the focus of his comments was on Social Security, the speech was an implicit critique of Bush administration tax policies. He told Congress that growing budget deficits could imperil what he was terming a "vigorous" economic expansion. The deficit could lead to higher interest rates, he said, and make it difficult to pay for future programs and benefits.
Greenspan's comments, coming at the beginning of what is expected to be a hotly contested presidential election could mean that the issue of Social Security's future will be dragged back onto the national stage.
The Bush administration and the investment industry will tell you that Greenspan's comments prove that drastic measures are necessary to fix Social Security, that parts of it will have to be transformed into individual accounts that future retirees can invest in the stock market. This way, the so-called reformers say, workers become investors and can earn a higher return on their retirement income.
But that's like playing Russian roulette with our government retirement accounts. I know my work-based retirement fund took a beating over the last few years when the stock market slumped. And I'm not alone.
But Social Security reform is not really what is needed here. As the Social Security Trustees' report shows, the program should be solvent until 2042.
So where's the cash? As economist Dean Baker of the Center for Economic Policy Research wrote in his March 1 Economic Reporting Review newsletter, there is a more than $1.7 trillion surplus in Social Security.
"If Congress follows Greenspan's current recommendations for cutting Social Security, the large surplus built up by the Social Security trust fund (more than $1.7 trillion presently) will not be used for Social Security," he writes. "Instead, the money collected through Social Security taxes will be used to pay for farm subsidies, defense, and other categories of general government spending."
The Bush administration is using Social Security taxes to fund its tax cuts to the wealth, Social Security taxes that are far more regressive than the federal income tax. Social Security is funded by a payroll tax capped at about $85,000 in wage income, meaning that someone who earns a $1 million a year pays the same in payroll taxes as someone earning $85,000. But, as Citizens for Tax Justice made clear at the time of the latest tax cuts, the top 1% of all wage earners (those with an average income of about $1 million) were slated to earn almost one-third of the benefits of the tax cuts, while the 60% of wage earners making less than $77,000 would get just 39.9% of the total benefits.
So the problem is not Social Security, but the Bush tax cuts, which turned an anticipated surplus at the end of the Clinton administration into an expected $521 billion deficit by the end of the current fiscal year in September.
"In effect," the Atlanta Journal-Constitution wrote after Greenspan's comments to Congress, "Bush gave tax breaks to the wealthy, and that choice forced the prospect of now saying to the working classes, who disproportionately depend on Social Security in retirement, 'Your benefits may have to be cut.'"
Therefore, if we are serious about safeguarding Social Security we need to roll back the Bush tax cuts -- at least for the top earners and let the administration know that it cannot continue shifting the tax burden from the rich onto the backs of working people.
Groups working to reverse the Bush tax plan include:
American Federation of State, County and Municipal Employees, AFL-CIO, 1625 L St., NW, Washington, DC 20036; phone, 202-429-1000; www.afscme.org.
Campaign for America's Future, 1025 Connecticut Ave., NW, Ste 205, Washington, DC 20036; phone 202-955-5665; www.ourfuture.org; email email@example.com.
Fair Taxes for All coalition, see www.fairtaxesforall.org or email firstname.lastname@example.org.
Leadership Conference on Civil Rights and Leadership Conference on Civil Rights Education Fund, 1629 K St, NW, 10th Floor, Washington, DC 20006; phone 202-466-3311; www.civilrights.org.
National Women's Law Center, 11 Dupont Circle, NW, # 800, Washington, DC 20036; phone, 202-588-5180; www.nwlc.org; email, Info@nwlc.org.
People For the American Way, 2000 M St., NW, Ste 400, Washington, DC 20036; phone 800-326-7329; www.pfaw.org; email, email@example.com.
United for a Fair Economy, 37 Temple Place, 2nd Floor, Boston, MA 02111; phone, 617-423-2148; www.stw.org; email firstname.lastname@example.org.
USAction, 1341 G St. NW, 10th Floor, Washington, DC 20005; phone, 202-624-1730; web usaction.org; email email@example.com.
Hank Kalet is a poet and managing editor of the South Brunswick Post and the Cranbury Press in central New Jersey. Email firstname.lastname@example.org.