Federal Reserve Board Chairman Alan Greenspan has caused a political furor by calling this past week for a cutback in the benefits that the Baby Boom generation can expect to receive from Social Security when they retire–something that will start to happen in 2011.
Greenspan made this proposal during his latest appearance before Congress, claiming the hit on boomers would be necessary because of the staggering deficits facing the U.S. in the wake of President Bush’s unprecedented tax cuts.
Now aside from the fact that Greenspan failed to suggest to Congress the obvious alternative solution for eliminating those staggering deficits–rescinding the tax cuts that are causing them (in fact he said he favors making them permanent, instead of letting them expire as would currently happen without any Congressional action to keep them)–it seems fair to ask what Greenspan himself is doing about his own retirement.
In fact, Greenspan, who was born in 1926, has been very careful to prepare a very comfortable retirement for himself. According to some accounts, one key reason he left Wall Street and went into government service was for the pension. As the story goes, Townsend-Greenspan & Co, a pension management firm that Greenspan founded, actually did such a poor job of predicting the direction of the market that the enterprise was about to go belly up and had to be liquidated. As one former Greenspan competitor, Pierre Renfret, recalls, ‘When Greenspan closed down his economic consulting business to go on the Board of the Federal Reserve he did so because he had no clients left and the business was going under. We even went so far as to try and hire some of his former employees only to find out he had none for the 6 months prior to his closing. When he closed down he did not have a single client left on a retainer basis.”
According to Renfret, it was the failure of Greenspan’s company that led him to turn to government employment, initially going to work for the Ford Administration, and later taking a job with the Federal Reserve Bank.
Since the early–90s, when he hit retirement age, Greenspan has been cashing a monthly Social Security check that is at the maximum benefit rate–currently just over $1800. That might seem chump change for a guy who’s pulling down a salary of $172,000 a year, but it will rise when his wife, NBC journalist Andrea Mitchell, starts collecting her Social Security and retirement pension checks, too.
Then of course, there will be that fat federal pension check that will start arriving when Greenspan finally decides to step down from his sinecure at the central bank. According to people familiar with the workings of the federal pension program, Greenspan can probably expect to collect close to $100,000 a year in his dotage, making his total personal retirement take just from pension and Social Security about $121,600 a year. Of course, it’s unlikely that a man with Greenspan’s income and background (he’s trained as an economist, worked on Wall Street and is the son of a stockbroker), wouldn’t also have availed himself of the Keogh and IRA tax breaks available to him, which means he must have a sizeable private retirement fund too.
It’s more than ironic–cynical and callous are probably better terms–that a man with these kinds of assets, and who has benefited so handsomely from the New Deal’s most famous legacy, would be out front calling for diminished benefits for the next generation scheduled to begin retiring just after him.
It’s particularly galling that this call for benefits cuts is coming from a guy who contributed so mightily to the mismanagement of the U.S. economy in the late 1990s — mismanagement that led to the collapse of the stock market two years ago, and the needless and wanton destruction of millions of people’s retirement funds. Writing in a Morgan Stanley research report, analyst Stephen Roach says Greenspan, despite admitting in closed meetings of the Federal Reserve Board that there was a dangerous stock market bubble developing, publicly endorsed the ludicrous theory that America has entered a ‘new economy” in which earnings didn’t matter, and failed to advocate any significant measures, such as an increase in margin requirements or a major increase in short term interest rates, that would have deflated that bubble, preventing the subsequent crash.
It ill befits those who are well fed to tell the starving classes to eat less. Neither should those who will retire like kings advocate taking away the meager income of those who will have little or nothing to live on when they are too old to work.
Dave Lindorff, currently on a Fulbright Senior Scholar residency in Taiwan, is working on “This Can’t Be Happening,” a collection of CounterPunch columns and other musings for Common Courage Press.