Greenspan Undermines Bush's Social Security Plan

[papau]

As Bush refuses reconsider any of his tax cuts as part of an effort to boost national saving, Greenspan suggests "forced savings" via tax increases are good - but that he supports making permanent the Bush tax cuts???????

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_berry&sid=aLm76TyE5mnQ

Greenspan Undermines Bush's Social Security Plan: John M. Berry

Feb. 16 (Bloomberg) -- Federal Reserve Chairman Alan Greenspan's testimony yesterday before the Senate Banking Committee undermined virtually all of the Bush administration's arguments for diverting some Social Security tax payments to fund private retirement accounts.

If the hole left in Social Security finances by the diversion were filled by added government borrowing, as proposed by President George W. Bush, creating the private accounts wouldn't add to national saving -- and for Greenspan, that is the overriding long-term retirement issue facing the nation.

In other words, in the chairman's view, Bush is touring the country to garner support for a plan that addresses the wrong issue. Instead of private accounts financed by borrowing, the president should be drumming up political support for a far more ambitious effort to reduce future federal budget deficits, which would increase national saving.

The Congressional Budget Office has estimated that the Bush private accounts plan would add about $1.1 trillion to federal budget deficits from 2009, the year the plan would become effective, to 2015. <snip>

Greenspan stressed that he likes the idea of private accounts -- if they were funded with money obtained by increasing taxes or cutting federal spending. In that case, they would represent a form of what he called ``forced saving,'' which would reduce consumption. <snip>

Interestingly, Greenspan indicated in several comments that he regards the $1.5 trillion worth of Treasury securities in the Old Age and Survivors Insurance Trust Fund as real assets. The difficulty is that, over an infinite time horizon, Social Security has an estimated $10 trillion unfunded liability, he said.
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