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Thursday, March 03, 2005

Quote of the Day 

From Harry Reid, courtesy of Zemblan patriot J.D.:
Asked Thursday his reaction to Federal Reserve Chairman Alan Greenspan's insistence this week that Social Security must be transformed, preferably along lines urged by Bush, Reid replied:

"I'm not a big Greenspan fan. ... I voted against him two times. I think he's one of the biggest political hacks we have in Washington," Reid said on CNN's "Judy Woodruff's Inside Politics."

Reid complained that Greenspan had decried budget deficits when Bill Clinton was president but he doesn't criticize Bush for turning a federal budget surplus he inherited from Clinton into trillions of new debt.
UPDATE: Lest we forget that Mr. Greenspan is not only a hack, but a disciple of Ayn Rand as well, he came out today in favor of what amounts to a national consumption tax -- which is, of course, among the most regressive forms of taxation ever devised:
Alan Greenspan, the Federal Reserve chairman, cautiously endorsed a shift in the nation's tax system on Thursday from one that primarily taxes what people earn to one that taxes what they spend.

Testifying before a presidential advisory panel on overhauling the tax code, Mr. Greenspan steered away from sweeping plans to replace the income tax with a national sales tax.

But he supported what many of President Bush's advisers see as a backdoor version of a consumption tax: expanding the role of tax-free savings accounts so that people could shield their income from taxes until they actually spend it . . . .

But Mr. Hoyer and many other Democrats say they oppose any form of a consumption tax, contending that it would primarily benefit the wealthy, who would escape taxes on investment income . . . .

A report by the Treasury Department in 2002, though, concluded that almost any form of consumption tax or flat tax would shift some taxes from upper-income to middle-income households.

Mr. Bush also faces a potential contradiction between his own goals. In initiating the advisory panel, Mr. Bush insisted that any new system would have to protect tax breaks for homeowners, the biggest of which is the deduction for mortgage interest.

But William Gale, a senior fellow at the Brookings Institution, a Democratic-leaning research group, said that the mortgage-interest deduction would allow rampant tax avoidance in a system where people did not have to pay taxes on their savings.

"If interest income isn't being taxed and interest payments are deductible, you and I could just lend each other $1 million," Mr. Gale said. "Neither of us could be taxed on our income, and both of us could deduct the interest payments."
UPDATE II: Paul Krugman asks the musical question "Does anyone still take Mr. Greenspan's pose as a nonpartisan font of wisdom seriously?"
To put Mr. Greenspan's game of fiscal three-card monte in perspective, remember that the push for Social Security privatization is only part of the right's strategy for dismantling the New Deal and the Great Society. The other big piece of that strategy is the use of tax cuts to "starve the beast" . . . .

And that's the story of the last four years. In 2001, President Bush and Mr. Greenspan justified tax cuts with sunny predictions that the budget would remain comfortably in surplus. But Mr. Bush's advisers knew that the tax cuts would probably cause budget problems, and welcomed the prospect . . . .

According to starve-the-beast doctrine, right-wing politicians can use the big deficits generated by tax cuts as an excuse to slash social insurance programs. Mr. Bush's advisers thought that it would prove especially easy to sell benefit cuts in the context of Social Security privatization because the president could pretend that a plan that sharply cut benefits would actually be good for workers.

But the theory isn't working. As soon as voters heard that privatization would involve benefit cuts, support for Social Security "reform" plunged . . . . And the consequence of the failure of the starve-the-beast theory is a looming fiscal crisis - Mr. Greenspan isn't wrong about that. The middle class won't give up programs that are essential to its financial security; the right won't give up tax cuts that it sold on false pretenses. The only question now is when foreign investors, who have financed our deficits so far, will decide to pull the plug.

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