GREENSPAN HIJINX

Does anyone think that Mr. Greenspan is hurting Pres Bush reelection chances?

(1) The job market may be in a funk and oil prices may be in the stratosphere, but interest rates probably will climb again in September because the Federal Reserve is confident the economy's "soft patch" is temporary.

(2) Federal Reserve Chairman Alan Greenspan's warning Friday of a looming crisis for Social Security and Medicare should be a wake-up call that President Bush's economic policies have failed. The weekend before the RNC!!!

(3) It is widely believed in Washington that Greenspan spoiled Bush Sr.'s chance of re-election in 1992 by running monetary policy too tightly.

Does anyone feel we have a repeat of 1992? I feel interest do not need to raise while the economy is struggling along. This is not a soft patch this is thin ice.

Greenspan has been the fed chief since 1987. Does he really need to come out the weekend before the RNC to beat this drum? I thought he was not suppose to be political. Did not hear boo from him before the DNC. Hmmm!

What do you TSPers think?

MT

[Timer]

(3) It is widely believed in Washington that Greenspan spoiled Bush Sr.'s chance of re-election in 1992 by running monetary policy too tightly.



Bush Sr. is on the recordthat he believes Greenspan torpedoed him. We'll never know.....

[Rolo]

Greenie is certainly not politically neutral or reserved.

I think interest rates need to be left alone for a while...another example of a gov't weenie changing things too quickly...before they settle...and everything is constantly oscillating never stabilising, reactionary.

Greenie needs to go fishing or something for a while.

[Mike]

I don't know where the originator of this thread gets the idea that the approaching problems with these programs somehow constitute a "wake-up call" regarding current economic policies. These problems have been talked about for years. The projected year of insolvency has changed from time to time, but the overall problem hasn't disappeared. Multiple Congresses and presidents have ignored it - mainly because they are too scared to touch this hot-button issue - namely because seniors vote in droves, and if anyone threatens to reduce their benefits in any way, there will be political hell to pay.

For those who haven't paid attention, the problem with social security is simple: payroll taxes fund the benefits - but the ratio of workers to retirees is declining. So, either the benefits must go down or the taxes must go up... or some combination of the two must occur. Neither solution is politically great though... and it won't come up in this election, unless someone wants to give up the senior vote en masse.

[Rolo]

Right on, Mike. :^

Socialism Security needs to be phased out, but who is really going to commit political suicide by doing the "right thing"?

And tangentally speaking....if you can't punch a friggin' hole in a friggin' card, then you should have no say in who governs us. :dah:
But no, our solution? Make the polls idiot-proof....so...that...the idiots can vote. GUH!

Yet I am the one who is nuts? baha!

[Spaf]

OUCH! that hurt! But, it's your constitutional right to say that. :X

Disagree!

[Mike]

I need to comment further on this and provide some clarifying remarks on what is going on here. First off, I'll address social security.

Social security was created under the FDR administration and was NOT intended to be the sole basis of support during a person's retirement. Sadly, many people are using it precisely for that reason (which in my mind represents the major pitfall of any government entitlement program). This behavior lends itself to a strong "fear factor" that persists in the senior voting bloc. If a candidate can be successfully labeled as wanting to cut or reduce benefits, he is SOL in the election. Such an environment makes it extremely difficult - if not impossible - to enact any substantive reform. The 1% privatization attempt went nowhere for precisely that reason - which is comical considering how minimal an impact it would have on the overall problem. That is the political side to social security. Now here is the economic one: we all pay taxes which fund this program, regardless of our income. This is a payroll tax that hits both our end and the employer end of things, which essentially puts the true tax rate at around 12% for most of us (which by the way is twice the tax rate paid in the 1960s before benefits were dramatically increased).

Now then - what does the future of this program look like? Frankly, it looks bleak. The worker to retiree ratio will drop from 4-1 to 3-1 over the coming years. That will effectively cut the revenue stream - not just for SS but for the government as a whole - by one-fourth - unless those of us still working can somehow increase our incomes by that amount and still avoid rampant inflationary pressure associated with such a strong rise in income. :P

All of which begs the question, what do we do about it? "Nothing" has ruled the day for the past two decades. One way or another, we will be forced into action at some point sooner rather than later. Unfortunately, since the aging people have the strength in numbers, I think those of us who are working for the next 40 years are out of luck. We will almost certainly see another increase in payroll taxes at some point to preserve current benefit levels - since the politicians want to keep their power, which means appeasing the portion of the population which votes the most - even if it is at the expense of the rest of the population and at the long-term health of the entire population.

On to point number two: Medicare.

To put it bluntly: more people are getting older, which means more people will have medical problems. That means more people will use medicare and place a dramatic upward pressure on federal outlays to this program. Unlike social security, medicare does not have its own 12% tax rate to draw funds. Further complicating things is the fact that due to the shifting demographics, health care services themselves will be placed under tremendous stress in addition to the federal budget. We already have severe national shortages in nursing and in clinical laboratories (I know this to be true both on a personal level and on a broader statistical level). Malpractice insurance premiums are driving doctors out of practice, which is going to create a major shortage in thatarea of health care employmentas well. Drug costs are already high due to the massive expenses needed to fund the research and clinical trials necessary to develop them. Long term, this looks very ugly for everyone involved.

I expect salaries to rise dramatically in the medical field to compensate for the severe shortage of labor. I also expect massive increases in technological investment throughout healthcare to offset the fact that staffing needs are not being met (and in all likelihood, will never be). This means higher costs for medical care - which means higher costs for medicare... the net result meaning the government will be paying a lot of money in the future... which will place greater strain on the taxpayers. We already spend hundreds of billions on medicare annually. I can't fathom what this figure will balloon to in twenty years if current policies are left unchecked.

I don't care if people are liberal or conservative on these issues - what I do care about is the fact nothing is being done about them. If this goes on too much longer, we are looking at a financial disaster. The government cannot - nor should it be expected to - provide for our every need. We need to take some personal responsibility here and cut back on the benefits (not to mention gov't spending as a whole which has been recklessly out of control for many years). If we fail to act, we will be forced into the brutal decisions facing western europe and Japan - nations whose elderly population percentages dwarf even our own.

Mike,

Everyone knows of the social security/medicare problem. But was it really neccessary for Greenspam to make his bigannouncement the weekend prior to the RNC? All I am saying is Bush Senior feels thatGreen-ham-eggscrushed his reelection changes and it appears he is trying to hurt Bush Junior reelection chances. Greenjeans was before Congress for two days in July (saying the economy is great...by the way), why didn't he announce this stuff then??? I agree with you this problem has been ignored for far to long but it just not smell right that Greenie appears to be putting the problem and fault squarely on Bush Juniors shoulders. For those not in the know that is what it looks like. Kerry should got a lot of one liners out of these...and for people that do not know this was a problem it is not reflect well on the current Pres.

I also do not care what party you belong too but the timing of this was interesting to me. It is like he wants to take the wind of our the RNC sails as best he can. I felt it was unfair for him to do.

Thoughts?

MT

[rokid]

Hey, sounds like we need another tax cut. That'll fix Social Security, Medicare,the economy, AND shrink the deficit. Who needs Greenspan, "W" has it under control!

Incidentally, us Baby Boomerscashing in our equitiesover the next fewdecades should providelots of bargains for buyers and thrills for those monitoring their portfolios. I hope that South Asia and the Pacific Rim have enough cash, and the incentive,to finance our retirement.It's not just SS that's a problem.:^

I believe the government needs to get out of the social security, medicare, health care and every other care. U.S. employeers are not hiring because they are terrified of health care costs. It makes sense to outsource overseas to people that will get paid for when they work and do needbenefits packages. If I was in their position I would do it too. We are a capitalist not socialist nation. Like trying to give democracy to a islamic nation we are barking up the wrong tree.

Now it is hard to find a company that even offers a 401K program. It is unfair that reasonable people are paying for people that are not reasonable for their own future. Give me the money I give to medicare and social security each month I will fend for myself. But if I am paying into it I want something back. The government spends to much money plain and simple. With income tax, property tax, state tax, gas tax, sales tax, social security, medicare, etc, etc I am paying .55 on the dollar earned to state and federal governments. The first thre days of the week I am working to pay taxes. Seems kind of crazy.

MT

[rokid]

I believe I'll go fishing.

[Rolo]

Good post, Mike, and I wholeheartedly agree.

Income tax was supposed to be like the penny tray....just tax a weeeeee little bit...nobody would feel it...and it was supposed to be temporary if I remember correctly.

ribbit!

[boiling frogs are we]

Spaf wrote:

OUCH! that hurt! But, it's your constitutional right to say that. :X

Disagree!


With the SS part or the hole-punching part? heh

re: hole-punching...now we are going to set these masters-of-the-awl-and-paper in front of one of these new-fangled techno-computer-thingies!?!? They need to lay it out like a bingo card and give them a dabber....then have an announcer just call out the candidates and they mark them! It'll be fun!

Highjink II.

1030 economy is gaining traction.

1400 Beige Book comes out and the economy is sliding into recession.

Who to believe?

The market knows.

Good luck all!

MT

Rolo,

The colonists did not see a 100% return on their taxes so they cried foul. If we did not have state, fed and local tax on gas, gas would be around 1.15 per gallon vice 2.26 I am paying now in HI. With the increase in property taxes (14%), car registration (35%), car/house insurance(19%)I am starting to feel the pinch. Yes, the fed tax was lowered but all the others have surged, in my opinion.

Horder cash.

MT

[Mike]

I wouldn't be surprised if they levied an air tax on us for breathing at some point.

[TheProphet]

Dr. Bill,

Greenspan had failed as fed chief...
He needs to retire and blame the democrates...
Greenspan is for Kerry this time...
Bush is over... besides... Bush versus Gore...
Bush versus Kerry... If it was close then...
This time Kerry seems to be the next...

Good justification:
for oil going up...
for the $$$ going down...
for 2005 being a bad year for the market...
for new image after war...
for social security to be harm...
for Bush to profit from it...

What do you think??? Bush needs to smell the coffee...

Leon