IMPORTANT! Greenspan gets it right....finally!
In his testimony before the House today, Alan Greenspan finally said what seems logical to me: He "suspects" that personal retirement accounts add to overall national savings and boost the national "capital stock". For the record, the logic of this is only enhanced by Paul Krugman's vehement opposition. I was disappointed in Greenspan the last time he spoke. He seems to have realized how pro-big-government he sounded last time. He's being quite aggressive today, in a subtle Greenspan-speak sort of way, about the benefits of personal accounts and the fact that the system as it is now is unsustainable. He finally made the argument I've been making for a long time but which people in Washington have been afraid of: That the Social Security surplus masks true government spending and that if there were really a Trust Fund which held Social Security funds the deficit would be more like $550B instead of $400B. THIS IS HUGE: Now, as I type, he's making the critical point that in personal accounts, unlike Social Security, "that wealth is yours" which has several important implications including that you have control over your own future and that you can bequeath your savings. "Private accounts will build up individual wealth which is a value in itself." More Greenspan quotes from today: (Note, I might miss a word or two trying to keep up with him while he's speaking but I'll quote as accurately as I can.) "Going to private accounts is a way to create the whole funding which is essential, and is a way to guarantee the retirement benefits of future retirees." "The current system is completely inappropriate for the demographics we have now....We have to find a better model than exists today." On another issue, the trade deficit: "Analysis shows little relationship between the trade deficit and jobs." "We open our economy to goods from abroad which we obviously purchase because they are cheaper or better than what we could buy at home." "The interest of Americans combined with the willingness of foreigners to finance us is the cause of the trade deficit numbers you bring up. It's an issue of choice on the part of the American people." "Because the financing accumulates over the years and we have to pay interest on that debt, we have to make sure things are in balance...we should constrain our appetite our imported goods. However what works well for us is exchange rates, differential wage rates...the market and globalization generally deals with these issues and have improved quality of life for people around the world." "As difficult as competition is for a lot of us...we have to acknowledge the fact that competition adds to standards of living and makes us all work better and harder, and makes for a better society." Greenspan agreed with a liberal democrat that he's concerned with a widening disparity in national income between rich and poor. But, he then turned the issue well saying that "it's fundamentally an issue of education" (as opposed to taxation.) "We have to find out why other countries education their children better than we do."
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