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View Diary: Reid: Greenspan "One of the Biggest Political Hacks" in DC! (169 comments)

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  •  I'll start with some old opinions: (4.00)
    Financial Times (London,England) March 4, 1999, Thursday LONDON EDITION 3 SECTION: THE AMERICAS; Pg. 06

    LENGTH: 515 words

    HEADLINE: Greenspan sees little gain from Social Security plan

    BYLINE: By Gerard Baker in Washington

    DATELINE: Washington

    Alan Greenspan, the chairman of the Federal Reserve, clashed again with senior officials of the Clinton administration yesterday when he intensified his one-man campaign against their plan to invest a portion of public pension funds in the stock market.

    Mr Greenspan said shifting part of the accumulated surplus of Social Security, the state pension scheme, into equities from the Treasury bonds it now holds exclusively would not produce the big financial gains claimed for it.

    Nor would it raise the overall returns on the economy's assets needed to meet the long-term goal of raising pension incomes.

    "Investing Social Security assets in equities is. .. largely a zero-sum game," he told the House of Representatives' ways and means committee.

    The Fed chairman's remarks went further than his previous expressions of scepticism about the plan, which had been based largely on his concern that the new funds would be subject to too much political interference. Yesterday he challenged the economic assumptions of higher returns on which the proposal was based.

    But testifying before the same committee later, Lawrence Summers, deputy Treasury secretary, defended the plan, arguing it would increase returns.

    "Between 1959 and 1996 the average annual rate of return earned on stocks was 3.84 per cent higher than the rate earned on bonds held by the trust funds," he said. "We believe that it is important to give all Americans, even those of low and modest means, the opportunity to enjoy these potential benefits from stock market performance."

    However, Mr Greenspan argued the likely gains had been generally overstated. The process of shifting $ 600bn (£375bn) of public money away from bonds towards equities would in itself lower the price of bonds and raise the price of equities, reducing the return they produced.

    "If this is indeed the case, then the net increment to the government of investing the trust fund in equities on an ongoing basis presumably would be less than the historical rates of return suggest," Mr Greenspan said.

    Mr Greenspan said that since the measure would have no overall effect on national savings, any increases in the returns to be had from equities would be offset by lower returns for the rest of the economy.

    "The underlying economic assets in the economy would be unchanged, as would the total income generated by those assets. Any increase in returns realised by Social Security must be offset by a reduction in returns earned on private portfolios, which represent, to a large extent, funds held for retirement."

    Mr Summers dismissed Mr Greenspan's earlier claims that the proposal would lead to politicised decision-making about equity investments, reducing still further the likely rate of return. He said the experience of state and local governments did not support that argument.

    The Fed chairman restated his support for the broad thrust of President Bill Clinton's plans, which Congress is considering, to use most of the projected surpluses (invested in Treasury bonds) to shore up Social Security.

    LOAD-DATE: March 04, 1999

    •  What a great find! (4.00)
      Gee, I love hypocrisy!
    •  Every Dem Should KNOW This (4.00)
      Greenspan = total hack job.  Just read that stuff.
    •  NICE! (none)
      WOW! YEAH I remember that!
      •  This is the great thing (none)
        I dont think todays politicians are at all prepared for real accountability, for dealing with a world where anyone can look up a statement from the past in a minute and publish it to a million people instantly.  Think about how hard that used to be 15 years ago, and how effortless it is now, and the implications that has on saying what ever fits your political mood.  Devastating.
    •  thank you, thank you (none)
      Let's turn it up!
    •  Finding more of this stuff (4.00)
      From WaPo, right after Clinton's '99 SOTU.

      Greenspan Wary of Market Role in Social Security Rescue

      By Amy Goldstein and Steven Mufson
      Washington Post Staff Writers
      Thursday, January 21, 1999; Page A1

      President Clinton's surprise proposal to link the fate of Social Security more closely to the stock market began to stir doubts yesterday about how his initiative would affect the U.S. economy and prompted potent criticism from Federal Reserve Chairman Alan Greenspan.

      A day after Clinton made an overhaul of Social Security the centerpiece of his State of the Union address, his plan raised fundamental questions about whether the federal government should assume an unprecedented role in the workings of private enterprise.

      Greenspan, reflecting a wave of criticism that surfaced yesterday, contended that by pouring billions of dollars in Social Security reserves into Wall Street for the first time, the government inevitably would mingle politics into its investment decisions and would not produce the kind of returns that the administration hopes for. He also raised concerns about whether the government would end up in the business of picking which American companies are worth investing in.

      "There is really no strong evidence to suggest any positive aspects of moving Social Security funds into equities," Greenspan, the chief architect of the government's last major revisions to Social Security 16 years ago, told members of the House Ways and Means Committee.

      •  DUDE!! LOOK @ THIS MONEY QUOTE! (4.00)
        "If the government owned all the equities, we wouldn't really be much different than the old Soviet Union," said Kevin Hassett, resident scholar at the American Enterprise Institute. "I think they'll want to tinker and the tinkering will be very damaging."

        Jesus H.!  Can anyone say flip-flop?

        Oh, and while you're at it, read this jem:
        GOP Pledges 'Lock' on Social Security

        Republicans who control Congress are determined to end decades of raids on the Social Security trust fund by locking away the money under strict congressional control, the GOP said yesterday.
    •  He's right (none)
      Or rather, he was right then. (He's wrong now.) The stock market isn't a magic money machine that will produce higher rates of return that government bonds. Most rich people know this, which is why the invest a lot of their wealth in those government bonds, just like social security. I'm sure Greenspan does the same.
    •  Could you send that to Keith Olbermann? n/t (none)

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