Sunday, September 9, 2012

2005 Video of Greenspan Admitting Social Security Can't Go Broke

commentary by Roger Erickson

PAUL RYAN: “Do you believe that personal retirement accounts can help us achieve solvency for the system and make those future retiree benefits more secure?”

ALAN GREENSPAN: “Well, I wouldn’t say that the pay-as-you-go benefits are insecure, in the sense that there’s nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question is, how do you set up a system which assures that the real assets are created which those benefits are employed to purchase.”


Seems to go right over Paul Ryan's head. In one ear, and nothing blocking exit out the other.

Many thanks to Selise for for finding and clipping this video, and Senexx for adding it to the YouTube MMTChannel.

MARCH 2, 2005, house committee on the budget hearing:

transcript:

full cspan video:

quote is in clip from 02:42:00 to 2:42:57


This should open up a can of worms for every person in America capable of rational thought.

And that rational thought leads inescapably to the conclusion that FICA taxes to "fund" a national elder-care policy were never needed, and should never have been enacted.

"We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren't a matter of economics, they’re straight politics.”  FDR

FDR's Cabinet realized early on that FICA taxes had been a mistake, and in any event discussed removing them in the case of another depression. Then admitted they were all politics, not for any real economic reason.

Sane policy should have been the best reason - from the start - for not enacting FICA taxes.  [Sounds more like the best face FDR could put on a policy debacle & political loss - and also an act of either personal cowardice or baffling ignorance.]
[We got off the gold std, but stayed on the class-war & Control Fraud standard!]

Our entire political operations are built on Control Frauds, ... frauds that simply can't scale with the diversity of our national expansion.

With scale, we end up in the disastrous position of being afraid to jettison known frauds, for fear that the future might be worse!

A nation started on courage, and now stalled by outright cowardice, afraid of all the options the future holds.

Yet what do we do when the kinetics of politics is a generation ... or two ... behind the kinetics of most other operations?

Build "cathedrals" anyway? When any honest person knows they won't scale? And that lives will be ruined, if not sacrificed?

What happens when that divergence exceeds survivable tolerance limits for the nation? Slink out of town, with funds sequestered in hopefully safe Swiss bank accounts? If the truth were known, no Swiss citizen would be welcome in any country on earth - simply for endorsing that global fraud as a national policy!

It's clearly time for new methods. Another Constitutional Assembly? Something better?
Or something worse?

How would YOU tell 150 million salaried adults that their wages needn't ever have BEEN taxed for FICA their entire life? And that they were taxed ONLY to keep one class of people over-taxed and under-funded relative to another class of people? Worse, that the same was true of the FICA taxes levied on their parents & grandparents!

Them's fightin' words! There will someday be hell to pay for all that have contributed to that truly disgusting crime, through silence, fear or complicity. If that's not treason of the highest order, then we may as well all emigrate to some country where honesty, courage, morality & national ambition still reign.

The scale of the "FICA-tax for Social Security" fraud leaves one nauseous. It's not what one wants to think of one's own country.

To realize that there are whole Foundations dedicated solely to maintaining a regressive tax on labor, only exacerbates the shame. Taxing labor cannot be accepted as the prerequisite for any public policy whatsoever. If we can - as simple policy - vote subsidies for highways, space exploration, worldwide military capabilities, corporate farming, and endless corporate supports - from agriculture to research - then we can also support our own citizens as a simple policy.  That's not even mentioning bailouts to frauds under the guise of the FDIC negotiating reductions in corporate debts to FDIC-seized banks.

For any person who perpetuates a fraud after being advised of operational reality, the fraud is no longer innocent. It is self-defeating for their own family, children & country. That is, it is treason.

FDR's words, and SocialSecurityWorks current adherence to them, are a Big Lie that would make any Fascist proud. Certainly more fiendishly distributed & hidden than most fascist strategies. And, it's worked! Tens of millions of Americans have proudly walked into voluntary indentured servitude.  Right now it's too nauseous for me to expand on it further. The whole topic just makes me want to cuss & kick something. It's on the scale of the Pope & Warlords inventing permanent royalty, for the masses to permanently revel in serfdom to.

Worse, it's so damn stupid it's insulting to America. What happened to American ingenuity?

37 comments:

Bob Roddis said...

"The question is, how do you set up a system which assures that the real assets are created which those benefits are employed to purchase.”

That's the big question your silly MMT cannot answer, isn't it?

Matthew Franko said...

http://cdn.videos.bloomberg.com/t1MG5sNDoierLyVBOaJc5BJN4JQu7qxl/DOcJ-FxaFrRg4gtGIwOmw3OjBrOzSgXP

Not so fast.....

Dan Kervick said...

The FICA tax seems to have been created to convince the wealthy that the middle class was paying for its own retirement benefits rather than drawing on redistributed revenues from the wealthy, and also to disguise a pay-go inter-generational transfer system as a savings system, so that politicians couldn't eliminate Social Security easily without creating the impression that they are stealing the beneficiaries' earlier "savings".

The real questions are (i) How big are the federal government's total tax revenues? (ii) How is the total bill of tax obligations distributed among the different members of the taxpaying population,(iii) Is the total tax bill the appropriate size for the size government we have, and in light of prevailing macroeconomic conditions? and (iv) What share of our total national output should go to retirees?

Getting rid of the FICA tax would definitely help to redistribute tax obligations upward. But it is politically risky, because if eliminating it is portrayed simply as a "holiday", rather than a permanent move to eliminate the trust fund and pay social security out of the general fund, then in that intermediate period Social Security will be vulnerable to political attack by those saying the program is dangerously "underfunded".

As I understand it, the Japanese have a similar system that makes the savings element more explicit. Instead of paying a Social Security "tax", they are required to purchase government retirement bonds. Then the bonds are redeemed at retirement. Of course, its still pay-go, since the government doesn't actually lock up the money that is used for the bond purchases in a safe, but spends it on current projects, and the bonds are redeemed out of government revenues that exist at the time of the redemption. That's one reason Japanese government debt is so high. We don't count most of our obligations to seniors as official debt, whereas in the Japanese system it is.

I wouldn't say FICA was a "big lie". But it was politics, designed to protect Social Security as a program from its many opponents.

Dan Kervick said...

One part of the MMT answer to Greenspan's question about the creation of a sufficient amount of real assets is to insist that we should always hire everyone willing and able to work, so that they are usefully producing useful real assets, rather than remaining unemployed.

The private sector system foolishly misallocates large numbers of our people to the role of non-producing consumers of subsistence incomes. This system is both stupid and cruel. It's a ridiculous failure to invest our human resources wisely, and a savage failure to provide social solidarity and justice.

Tom Hickey said...

Bob Roddis, "That's the big question your silly MMT cannot answer, isn't it?"

Greenspan's could have been said in exactly the same words by any MMT proponent that understands MMT. The real resources will be available if the economy operates optimally in resolving the trifecta of growth (production) employment, and price stability. MMT shows how to accomplish that.

Letsgetitdone said...

Roger, This one was terrific. A really righteous rant.

paul said...

Currently each person working in the U.S. is able to produce enough stuff to support 3 to 4 dependents.

Even now with so much idle labor we are able to produce more than we need.

In the future, through advanced mechanization and robotics, each worker will likely be able to produce substantially more.

Senexx said...

Without meaning to play devil's advocate -

" With scale, we end up in the disastrous position of being afraid to jettison known frauds, for fear that the future might be worse!"

I agree that a known fraud should be removed however, I think I can recognise a reticence for it in a thought like:

Something is better than nothing.

y said...

The best way to ensure that the necessary real assets are not created is to stop investing in the creation of real assets.

People like Ryan seem to think that the government is incapable of playing an effective role in the creation of real assets, so everything needs to be privatised. The 'debt crisis' is just an excuse to push forward this agenda.

Ironically, privatising everything simply raises the level of private debt, which is genuinely unsustainable.



Bob Roddis said...

FLASH!! Hayek said it too! "No country can go bust!"

Hayek: "No country can go bust. All that happens is that economic conditions of daily life are getting much worse, so there will be scarcities. People will find that their income is no longer sufficient to maintain their standard of life. They will come to distrust first the present government and present policies, and may then be willing to return to an altogether different system. But I'm no prophet;

http://mises.org/daily/3311/Hayek-Meets-the-Press-in-1975

paul said...

"Ironically, privatising everything simply raises the level of private debt, which is genuinely unsustainable."

y, It looks like private debt has hit or is near it's natural ceiling at least until deficit spending clears some of it.

Balance the budget and privatize everything. Good times ahead. We will have reached an equilibrium all right.

I can't fathom the Masters of the Universe™ doing this to themselves. What good is all of that money in Dystopia?

paul said...

" With scale, we end up in the disastrous position of being afraid to jettison known frauds, for fear that the future might be worse!"

So now we're at the point we believe (or fear) that we need frauds for the economy to be healthy?

I can't make an argument that getting rid of frauds will make things worse. Quality of life isn't measured in dollars.

y said...

Bob,

MMT policies are about achieving price stability with full employment.

They are not about creating runaway inflation.

Matt Franko said...

Two moron Ayn Rand lovers here talking past each other, sort of reminds me of watching the old so-called "midget wrestling"...

So how does one reconcile this statement from Greenspan with his more recent statements that the US faces a future fiscal crisis?

Or even back then around the time he had this exchange w/ Ryan here is some other testimony:

"It's the principle that I think is involved here, namely that you cannot continuously introduce legislation which tends to expand the budget deficit," Mr. Greenspan said"

http://www.nytimes.com/2005/03/03/politics/03deficit.html?_r=1

This is a serious question...


rsp,

y said...

I think Greenspan believes that interest rates will have to continuously rise, eventually resulting in accelerating inflation or higher taxes, with higher taxes damaging the economy, leading to lower production and investment, leading to higher inflation, etc.

Bob Roddis said...

The real resources will be available if the economy operates optimally in resolving the trifecta of growth (production) employment, and price stability. MMT shows how to accomplish that.

No. The real resources will not be available. The economy will not operate "optimally" under a regime of unconstrained fiat funny money creation. MMT never even touches upon the subject of real economics, that is real savings, production and voluntary human exchange.

Greg said...

I guess I ll have to say it again in slightly different words

Please explain to me how, in a world of scarce real resources, (the world that Austrians claim we always are living in) changing the name of ownership on your retirement account gives you more access to real goods?

If the government is sending me 2000 month for 20 years (which I "paid into")or I have a nest egg of a half million at Morgan Keegan with which I can remove at what ever rate I wish, how am I better off in real terms with my privatized account? The second scenario does not magically make our production improve nor does it make any goods cheaper for me, its a simple change in name at top of the statement

y said...

MMT is not about uncontrolled fiat money creation. It's about real constraints, not imaginary constraints.

Yes, MMT is not the same thing as Austrian school theory. So what?

Bob Roddis said...

If the government is sending me 2000 month for 20 years (which I "paid into")or I have a nest egg of a half million at Morgan Keegan with which I can remove at whatever rate I wish, how am I better off in real terms with my privatized account? The second scenario does not magically make our production improve nor does it make any goods cheaper for me, its a simple change in name at top of the statement.

If you have your own account, someone (you and/or your boss) engaged in productive activities which others found valuable and you engaged in fruitful an profitable exchange. Then, you saved your earned money. Then, there was a foregoing of the use of those resources.

Since people don’t actually “pay in” to a government program like social security, the earlier recipients were not engaged in production or exchange. They were just taking someone else’s purchasing power. If you were to now receive a government check, you too would just be taking someone else’s purchasing power.

MMT depends upon being oblivious to the nature of human action, real savings, economic calculation, production and voluntary exchange while mindlessly asserting that these essential processes can be easily replaced simply by bureaucrats creating and squirting new fiat funny money around society. Like Lenin.

Tom Hickey said...

Greg, If the government is sending me 2000 month for 20 years (which I "paid into")or I have a nest egg of a half million at Morgan Keegan with which I can remove at what ever rate I wish, how am I better off in real terms with my privatized account? The second scenario does not magically make our production improve nor does it make any goods cheaper for me, its a simple change in name at top of the statement

The idea is supply side, Say's law, saving equals investment, which is to say that the monies saved will be allocated to productive investment rather than govt use.

False conclusion, since the assumptions are wrong.

Tom Hickey said...

I can't make an argument that getting rid of frauds will make things worse. Quality of life isn't measured in dollars

I can. A fundamental principle of liberal democracy is the rule of law and equal application of justice.

I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under God, indivisible, with liberty and justice for all.

Bob Roddis said...

A fundamental principle of liberal democracy is the rule of law and equal application of justice.

Which, of course, is violated along with due process of law ab initio with every squirt of fiat funny money in the process of the government creating money and purchasing power by spending here but not there.

Tobby Nobbis said...

The Austrian school depends upon being oblivious to the nature of economics, economics, economics, economics and economics while mindlessly asserting that economics can be easily replaced by gold. Like a bunch of complete fuckwits.



Slobby Blobbis said...

"Which, of course, is violated along with due process of law ab initio with every squirt of fiat funny money in the process of the government creating money and purchasing power by spending here but not there."

No, that's just what ignorant worshippers of Moron Rothbard believe. Because shiny bits of metal get you hard and you don't understand the first thing about money.

Matthew Franko said...

"I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under God, indivisible, with liberty and justice for all."

Ha Tom! you read my mind!

Ive been reciting that to myself lately and looking at the words and right there it is...

And these morons all go around with their lapel flag pins and they dont even know what the hell it all stands for!

What a disgrace they all are....

Good one... rsp,

Greg said...


Bob

" If you have your own account, someone (you and/or your boss) engaged in productive activities which others found valuable and you engaged in fruitful an profitable exchange. Then, you saved your earned money. Then, there was a foregoing of the use of those resources."


Everyone receiving SS worked and had income removed form their checks. Thus they were engaged in productive activities AND were forgoing from using resources as well. In fact in most cases, according to the privatizers, SS recipients are getting a raw deal and could get better returns if invested in the market, so they would actually have a claim to MORE resources now!


"Since people don’t actually “pay in” to a government program like social security, the earlier recipients were not engaged in production or exchange."


FALSE



"They were just taking someone else’s purchasing power. If you were to now receive a government check, you too would just be taking someone else’s purchasing power."


FALSE, its not just a simple transfer. You are misrepresenting it for idelogical purposes.



"MMT depends upon being oblivious to the nature of human action, real savings, economic calculation, production and voluntary exchange while mindlessly asserting that these essential processes can be easily replaced simply by bureaucrats creating and squirting new fiat funny money around society. Like Lenin."


YAAAAAAWNNN ! Get a new schtick Bob. This one is really wearing thin


Greg said...

Tom

Im unclear on the nature of your criticism. DO you disagree with my description of what a privateized account is versus a SS payment.

Tom Hickey said...

Not disagreeing with you, Gregg. Just saying that the rationale for privatization is the old supply side "saving = investment" interpreted to mean that saving funds investment argument.

Greg said...

Oh and BTW Bob


"The question is, how do you set up a system which assures that the real assets are created which those benefits are employed to purchase.”

That's the big question your silly MMT cannot answer, isn't it?"


How do YOU answer this? A system based on payments in non funny gold backed money makes people more productive? Are we really lacking productivity on this planet? Are there a lot of things we need and cant have? What are they? Seems to me we are currently producing more crap than we can consume right now and any drop in production of late is tied directly to the fact that "producers" see fewer and fewer customers with "funny money" coming to their doors! The producers are wanting more funny money not less! They just cant will customers into existence no matter what kind of supply side remedies get tried.

We are NOT an unproductive planet. We produce more food with less than one tenth of the people working on it then 75 years ago. Manufacturing capacity could fill every house on the planet with stuff in about 2 weeks.

Roger Erickson said...

@Dan Kervick

"The real questions are (i) How big are the federal government's total tax revenues? (ii) How is the total bill of tax obligations distributed among the different members of the taxpaying population,(iii) Is the total tax bill the appropriate size for the size government we have, and in light of prevailing macroeconomic conditions? and (iv) What share of our total national output should go to retirees?"

Dan, I think you're getting subtly but dangerously off target here. It is NEVER a question of tax revenue. Taxes are only one of our superficial, automatic stabilizers for controlling inflation. We should make it more, not less, automatic.

Simpler to say "What share of our total national consumption should go through retirees?"

Excessive or insufficient hoarding of static, financial assets, unused or poorly used are the simple tolerance limit we're tasked with avoiding. That's completely tangential to deciding how to value the impact of keeping older people in fruitful contact with younger generations.

Better to think in terms of parallel "knowledge inflation" and knowledge transmission, alongside "currency inflation."

Greg said...

Got ya Tom, and I agree.


Bob Roddis said...

From “Trotsky: The Ignorance and the Evil” by Ralph Raico:

In State and Revolution, written just before he took power, Lenin wrote,

“The accounting and control necessary [for the operation of a national economy] have been simplified by capitalism to the utmost, till they have become the extraordinarily simple operations of watching, recording and issuing receipts, within the reach of anybody who can read and write and knows the first four rules of arithmetic.”


http://mises.org/daily/4515

Lenin. The original MMTer.

Tom Hickey said...

"Everyone knows" Lenin = Keynes. All Austrian-Libertarians, that is.

Matthew Franko said...

Bob,

"have been simplified by capitalism to the utmost, till they have become the extraordinarily simple operations of watching, recording and issuing receipts, "

Now what? Are you telling us you are against capitalism????

If so, what are you FOR???

Anonymous said...

Bob, you have nothing to contribute.

Your comments are stupid, pointless, ignorant, offensive, incorrect, and irrelevant.

Edmund said...

That's the big question your silly MMT cannot answer, isn't it?

I think in pretty much the same way realistic growth models suggest, but reconciled with the financial sectoral balances that they typically ignore.

This is something that I find queer about critiques of MMT. Yes, the MMTers typically ignore the rest of economics outside part of macro, but that's because their own critique is more or less oriented toward that particular part of macro.

MMT doesn't mean the rest of economics goes away. If you add other things that some MMTers like - Wray's all about the Financial Instability Hypothesis - other parts of economics do go away, but not all of it. If you give no normative weight to the Welfare Theorems, or get rid of general equilibrium, or even get rid of all equilibrium, there's still a lot of economics left. Even if you think equilibrium doesn't exist, it might be an appropriate and tractable tool to think about certain phenomena.

Tom Hickey said...

This is something that I find queer about critiques of MMT. Yes, the MMTers typically ignore the rest of economics outside part of macro, but that's because their own critique is more or less oriented toward that particular part of macro.

The MMT economists emphasize that they are only a handful so far and they have only been around since the late 90's, Randy Wray and Bill Mitchell hooked up with Warren Molser based on Warren "Soft Currency Economics."

They are working in an area that not many economists in the past have developed and they ave specialized in this field. They presuppose a lot of work in economics that has gone before and is being done now, chiefly Post Keynesian. MMT economists and Circuitists are not working toward common ground based on the matters about which they agree.