#Krugman: Greenspan "just another partisan hack"
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<http://www.nytimes.com/2005/02/18/opinion/18krugman.html?hp>
Three-Card Maestro
By PAUL KRUGMAN
Published: February 18, 2005
lan Greenspan just did it again.
Four years ago, the Fed chairman lent crucial political support to the
Bush tax cuts. He didn't specifically endorse the administration's
plan, and if you read his testimony carefully, it contained caveats
and cautions. But that didn't matter; the headlines trumpeted Mr.
Greenspan's support, and legislation whose prospects had previously
seemed dubious sailed through Congress.
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On Wednesday Mr. Greenspan endorsed Social Security privatization. But
there's a difference between 2001 and 2005. In 2001, Mr. Greenspan
offered a convoluted, implausible justification for supporting
everything the Bush administration wanted. This time, he offered no
justification at all.
In 2001, some readers may recall, Mr. Greenspan argued that we needed
to cut taxes to prevent the federal government from running
excessively large surpluses. Even at the time it seemed obvious from
his tortured logic that he was looking for some excuse, any excuse, to
help out a Republican administration. His lack of sincerity was
confirmed when projected surpluses turned into large deficits, and he
nonetheless supported even more tax cuts.
This week, Mr. Greenspan offered no excuse for supporting
privatization. In fact, he agreed with two of the main critiques of
the administration's plan: that it would do nothing to improve the
Social Security system's finances, and that it would lead to a
dangerous increase in debt. Yet he still came out in favor of the
idea.
Let me make a detour here. The way privatizers link the long-run
financing of Social Security with the case for private accounts
parallels the three-card-monte technique the Bush administration used
to link terrorism to the Iraq war. Speeches about Iraq invariably
included references to 9/11, leading much of the public to believe
that invading Iraq somehow meant taking the war to the terrorists.
When pressed, war supporters would admit they lacked evidence of any
significant links between Iraq and Al Qaeda, let alone any Iraqi role
in 9/11 - yet in their next sentence it would be 9/11 and Saddam,
together again.
Similarly, calls for privatization invariably begin with ominous
warnings about Social Security's financial future. When pressed,
administration officials admit that private accounts would do nothing
to improve that financial future. Yet in the next sentence, they once
again link privatization to the problem posed by an aging population.
And so it was with Mr. Greenspan. He painted a dark (and seriously
exaggerated) picture of the demographic problem, and said that what we
need is a "fully funded" system. He then conceded that Bush-style
privatization would do nothing to improve the system's funding.
But privatization "as a general model," he said, "has in it the seeds
of developing full funding by its very nature." Nice metaphor, but
what does it mean? Clearly, he was trying to create the impression of
links where none exist.
Mr. Greenspan went on to concede that the opponents of privatization
are right to worry about the huge borrowing that Bush-style
privatization would entail.
Privatizers claim that financial markets won't be disturbed by all
that borrowing because the Bush plan prescribes offsetting cuts in
guaranteed benefits for the workers who open private accounts. Mr.
Greenspan, who does know a thing or two about markets, put his finger
on the reason why those prospective future benefit cuts wouldn't
offset current borrowing in the eyes of investors: "Well, the problem
is that you cannot commit future Congresses to stay with that."
Yet the chairman managed to avoid admitting the obvious - that
borrowing on the scale the Bush plan requires would substantially
increase the risk of a financial crisis. And the headlines didn't
emphasize his concession that crucial critiques of the Bush plan are
right. As he surely intended, the headlines emphasized his support for
privatization.
One last point: a disturbing thing about Wednesday's hearing was the
deference with which Democratic senators treated Mr. Greenspan. They
acted as if he were still playing his proper role, acting as a
nonpartisan source of economic advice. After the hearing, rather than
challenging Mr. Greenspan's testimony, they tried to spin it in their
favor.
But Mr. Greenspan is no longer entitled to such deference. By
repeatedly shilling for whatever the Bush administration wants, he has
betrayed the trust placed in Fed chairmen, and deserves to be treated
as just another partisan hack.
--
Election 2004
The Triumph of the Swill
"The National Government will regard it as its first and foremost
duty to revive in the nation the spirit of unity and cooperation.
It will preserve and defend those basic principles on which our
nation has been built. It regards Christianity as the foundation
of our national morality, and the family as the basis of national
life."
Adolph Hitler, My New World Order,
Proclamation to the German Nation
at Berlin, February 1, 1933
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