What was Alan Greenspan thinking?

Is he truly thinking that cutting Social Security benefits is a good idea? I've been pounding my head, trying to make it think like his, without success. [No, I don't think he's brain-damaged, the pounding was metaphorical.] But in the past week or so he's talked about limiting one program that has helped bring millions of people into the middle class (the Federal mortgage backers, Fannie Mae and Freddie Mac), and another program that provides for the elderly when they cannot work (Social Security).

What is he thinking? Here's Billmon's take on it:

Whiskey Bar: The Two Faces of Alan Greenspan:

Like the comic book villain, Chairman Al presents two distinct faces to the world --- two different personalities, really. One is the career civil servant who keeps watch over the economy -- raising or lowering interest rates as needed to keep both inflation and unemployment in check -- and regulates (along with the Comptroller of the Currency and the FDIC) the U.S. banking system.

That's the "normal" face of Greenspan -- the sober, conservative, but sensible, Greespan. The technician of money. The pillar of the financial markets. This is Paul O'Neill's public-spirited pal, the Alan Greenspan of The Price of Loyalty, the philosopher economist.

But being Fed Chairman is just Al's day job. His other role is to act as a critical behind-the-scenes player in every major economic decision made in Washington -- and some non-economic decisions as well. This is Greenspan the fixer -- partisan Greespan, enforcer of conservative free-market orthodoxy (unless, of course, a politically well-connected hedge fund and its creditors are in dire need of a federally arranged bailout.)

The latter face is one we don't get to see in public, so it's hard to tell exactly what it looks like. But there are some reasons to think it may be a little on the ideologically freaky side -- Greenspan's long association with the cult of Ayn Rand being just one of them. Just how much of Rand's kooky brand of libertarianism still lives inside that ancient skull of his?

In a later post, he quotes David Cay Johnston, in an interview on Lou Dobbs show. This reminds me that Chairman Al was also in charge of a Social Security "reform" panel back in 1983. This changed the fundamental character of Social Security, from a "pay-as-you-go" system to a "trust fund" system, where you paid into the trust fund, then they gave you back your benefits later.

Whiskey Bar: If the Face Fits II

Well, we can choose in America, if you want, to have a system in which the middle class and the upper middle class, people making $30,000 to $500,000 a year subsidize people who make millions of dollars. And if Americans want to vote for that they should do it.

I just don't think, Lou, that Americans would have gone for this if they had known what is happening. And since it was Mr. Greenspan who said pay your tax in advance and now he says, no, we're not going to give you the benefits, but we can't raise taxes on the rich. That seems to me morally troubling.

We cannot tax the rich. We shouldn't let the Federal home owner mortgage plans expand. Is Alan Greenspan that much of a plutocrat? Keep the rich rich, and the little guy down? No, because if he was, he wouldn't be doing the job he is, which doesn't pay one-tenth of what he could make in the private sector. He wouldn't keep all of his portfolio in US Treasury bills, which don't pay much at all, but keep him conflict-of-interest free.

(Is the Federal home mortgage program that much of a risk? Probably not. I don't want to get into his objections here, but they boil down to them getting to be "Too big to fail", and thus requiring a Federal bailout if that happens. Recall that Chairman Greenspan also bailed out Long-Term Capital Management hedge fund. Phrased another way, why should the Fed bail them out, but not a group packaging mortgages as long-term securities.)

Thing is, if we raised or eliminated the income cap on Social Security, that would take care of the problem for a long long time. See the Economic Policy Institute. Have people who make more than 87,000 dollars a year pay into Social Security on their whole income, not just on the part below 87,000 dollars. It wouldn't have that much of a contractionary effect on the economy, because at that high level of income the marginal propensity to consume is low. Since these people would be saving most of the money anyway, the net effect on economic growth would be low. So, his economic argument that raising taxes would damage the economy just won't wash. Also, if we repealed, or allowed all of the Bush tax cuts to "sunset", the revenue would pay for the combined Social Security and Medicare deficits, according to the Center for Budget and Policy Priorities.

I still cannot figure it out. I don't think he's a "true-believer" Randite who's decided now to let his spirit free and try to kill every government program he can on his way out, but that's the way he's acting. I'll keep thinking about it and keep you posted.

I cannot believe how he has been a perfect shill for the Administration on tax cuts, and now this. I've changed my mind about one thing. Bill Clinton shouldn't have re-appointed him.

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RANDITE: Follower of Ayn Rand, author and libertarian philosopher, whose "Objectivist" philosophy was popular in a few intellectual circles, and many anti-intellectual circles. Required reading by disaffected teenagers, who hopefully will grow out of it.