Greenspan does not support President's plan

It seems that Chairman Alan Greenspan is finally realizing that he may not know it all about the future. With a lot of confidence, he used to talk about problems with the US economy due to unusually large surpluses. He was so worried in 2001 that he suggested that tax cuts was the only solution to avoiding huge surpluses. He did not realize who he was dealing with. In 2005, we are now dealing with deficits that are so huge that as far as the eye can see most economists cannot imagine us getting out of the danger zone. It is definitely hurting the US economy and impacting the life of American people. (Related article: Greenspan and the Social Security)

So it was heartening that Greenspan is now suggesting a more measured and deliberate approach to Social Security privatization. The reason that he is doing so is because we have no good model to follow. The models that we do have all indicate that privatization (in the form envisioned by President Bush) is simply a terrible idea. If we look at the experiences with privatization in the UK and in Chile, what we seem to have now is the best system of all. It does not mean that it could not be made more robust and strong; but private retirement accounts are not a way to do it since they benefit no one other than the Wall Street investment banks. (Related article: Financial advisors suggest that Americans avoid private retirement accounts)

It was, therefore, no surprise that Greenspan said, "And if we were to go forward in a large way and we were wrong, it would be creating more difficulties than I would imagine." But that is not what President Bush wants to do who wants to move with privatization at Iraq-war style speed - no need to think or plan; just go ahead and do it, no matter what. After all, the consequences will be borne by American people, not President Bush or his campaign contributors from the financial services industry who will literally float in money after private retirement accounts are started. (Related article: Americans prefer retirement security over wealth)

"So 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, and recognize that there is yet another problem involved, which is this: Unlike almost all of the other programs with which we deal, moving to a forced-savings account technically does not materially affect net national savings. It merely moves savings from a government account to a private account," Chairman Greenspan warned. So like most financial analysts and planners, he agrees that helping Americans save for retirement is a good idea but it does nothing to solve the so-called, imaginary "Social Security crisis" in Bush's head.

Chairman Greenspan also warned about debt that President Bush has decided not to mention in his marketing pitch to American people. It is important that American people understand that privatization is estimated to cost somewhere between hundreds of dollars to a few trillion dollars and all of that will have to come from American taxpayers. "I do say, as I said previously, that I would be very careful about very large increases in debt. But I do believe that relatively small increases are not something that would concern me...I would say over a trillion is large," he warned again.

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