Tuesday, June 08, 2004

This is why Paul Krugman has a semi-weekly column. He has an enviable ability to get exactly to the point in a manner which is simultaneously both cool and cutting. Over the weekend he used this skill to nail Alan Greenspan to the wall.
Before Greenspan became Fed chairman, he headed a commission that recommended changes in Social Security to secure its future. The most important recommendation, adopted by Congress, was for an increase in the payroll tax -- a regressive tax that falls much more heavily on lower- and middle-income families than it does on the well-off. The ostensible purpose was to generate a surplus within the Social Security system, building up a trust fund to pay benefits once the baby boomers retire.

That was the bait; now Greenspan has pulled the switch. The sequence looks like this: he pushed through an increase in taxes on working Americans, generating a Social Security surplus. Then he used the overall surplus, mainly coming from Social Security, to argue for tax cuts that deliver very little relief to most people but are worth a lot to those making more than $300,000 a year. And now that those tax cuts have contributed to a soaring deficit, he wants to maintain the tax cuts while cutting Social Security benefits. He never said, "Let's raise taxes and cut benefits for working families so that we can give big tax cuts to the rich!" But that's the end result of his advice.
It's too bad Krugman doesn't go all the way down the road he began upon. He brief explorations as to why Greenspan did this in the first place are weakened by his unfortunate confusion between the concepts "independent" and "non-partisan". Krugman rightly recognizes that the legal rationale for the insulation of institutions such as the Fed or the Supreme Court is to enable them to make "correct" decisions which may violate the short-term interests of a standing government. He correctly calls this "non-partisan" (siding with neither party) but pretends it means "independent" (siding with no societal interests). It clearly does not.

Krugman offers an ideological reason for Greenspan's crass bait-and-switch (Alan serves Ayn Rand) and a political reason (Alan serves George Bush). How about a class-analytic reason: Alan serves capital? The Fed's job in a narrow sense is to ensure the profitability of American capital; more broadly, it is to ensure the structural conditions for profitability are also provided. If you can do the latter while elminating taxation on capital -- say, by increasingly shifting the structural costs of capitalism on to the shoulders of labor -- then why not?

It should be no surprise that, like Monty Python's Dennis Moore, Alan Greenspan steals from the poor and gives to the rich. Stupid bitch.


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