Friday, February 18, 2005
Alan Greenspan on Social Security
Federal Reserve Chairman Alan Greenspan testified before the Senate on Wednesday, 16 Feb and before the House on Thursday the 17th; check out 'Full funding' for retirement plan -- The Washington Times .Seems he said enough to let people on both sides of the Social security debate find something to their liking. So here are my picks of his key quotes and points on Social Security.
Senate Quotes :
“Pay-as-you-go creates no savings.”
“The simple form of pay-as-you-go, by construction, saves nothing.”
“If you’re going to move to private accounts, which I approve of, I think you have to do it in a cautious, gradual way.”
”[M]y own judgment is I think when you have assets 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.”
“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 … this in my judgment is one way in which you can address this particular question.”
House Points:
* Mr. Greenspan repeated his support for creating a new system of private accounts to fully fund Social Security's obligations to retirees in the years ahead.
* He said such a system would have an advantage over the current one because it would ensure that money supposedly set aside for retirement is actually saved for that purpose. Today, payroll taxes that the government doesn't use to pay retirement benefits are immediately spent on other items. About $1.5 trillion in Social Security funds have been spent that way.
* Another reason Mr. Greenspan said the private accounts would be desirable is they would enable many low-income workers to enjoy the benefits of building wealth for the first time.
And in My View :
Mr. Greenspan makes very clear in both sessions that the current PayGo system does not create any savings and that excess dollars going into the “Trust Fund” are really spent on other operations ( the Trust Fund shame); personal accounts correct that because the dollars go into real assets for named individuals.
These personal accounts do allow real prepaying for retirement, which was not the case for the past 20 years of the Trust Fund.
He also makes the case that personal accounts will create wealth for those on the lower half of the economic ladder.
For me, this confirms my belief that these accounts have two major societal effects – first, they start us on the road to a self-sustaining Social Security system; and second, they provide real wealth accumulation opportunities for all Americans.
