Book: Greenspan's Fraud: How Two Decades of His Policies Have Undermined the Global Economy by Ravi Batra

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http://www.buzzflash.com/hartmann/05/07/har05007.html

 

Greenspan's Fraud: How Two Decades of His Policies Have Undermined the

Global Economy by Ravi Batra

 

Thom Hartmann's " Independent Thinker " Book of the Month Review

 

What do you do when you want to screw only the working people of your

nation with the largest tax increase in history and hand those

trillions of dollars to your wealthy campaign contributors, yet not

have anybody realize you've done it? If you're Ronald Reagan, you call

in Alan Greenspan.

 

Through the " golden years of the American middle class " - the 1940s

through 1982 - the top income tax rate for the hyper-rich had been

between 90 and 70 percent. Ronald Reagan wanted to cut that rate

dramatically, to help out his political patrons. He did this with a

massive tax cut in the summer of 1981.

 

The only problem was that when Reagan took his meat axe to our tax

code, he produced mind-boggling budget deficits. Voodoo economics

didn't work out as planned, and even after borrowing so much money

that this year we'll pay over $100 billion just in interest on the

money Reagan borrowed to make the economy look good in the 1980s,

Reagan couldn't come up with the revenues he needed to run the

government.

 

Coincidentally, the actuaries at the Social Security Administration

were beginning to get worried about the Baby Boomer generation, who

would begin retiring in big numbers in fifty years or so. They were a

" rabbit going through the python " bulge that would require a few

trillion more dollars than Social Security could easily collect during

the same 20 year or so period of their retirement. We needed, the

actuaries said, to tax more heavily those very persons who would

eventually retire, so instead of using current workers' money to pay

for the Boomer's Social Security payments in 2020, the Boomers

themselves would have pre-paid for their own retirement.

 

Reagan got Daniel Patrick Moynihan and Alan Greenspan together to form

a commission on Social Security reform, along with a few other

politicians and economists, and they recommend a near-doubling of the

Social Security tax on the then-working Boomers. That tax created -

for the first time in history - a giant savings account that Social

Security could use to pay for the Boomers' retirement.

 

This was a huge change. Prior to this, Social Security had always paid

for today's retirees with income from today's workers (it still is

today). The Boomers were the first generation that would pay Social

Security taxes both to fund current retirees and save up enough money

to pay for their own retirement. And, after the Boomers were all

retired and the savings account - called the " Social Security Trust

Fund " - was all spent, the rabbit would have finished its journey

through the python and Social Security could go back to a " pay as you

go " taxing system.

 

Thus, within the period of a few short years, Reagan dramatically

dropped the income tax on America's most wealthy by more than half,

and roughly doubled the Social Security tax on people earning $30,000

or less. It was, simultaneously, the largest income tax cut in

America's history (almost entirely for the very wealthy), and the most

massive tax increase in the history of the nation (which entirely hit

working-class people).

 

But Reagan still had a problem. His tax cuts for the wealthy - even

when moderated by subsequent tax increases - weren't generating enough

money to invest properly in America's infrastructure, schools, police

and fire departments, and military. The country was facing bankruptcy.

 

No problem, suggested Greenspan. Just borrow the Boomer's savings

account - the money in the Social Security Trust Fund - and, because

you're borrowing " government money " to fund " government expenditures, "

you don't have to list it as part of the deficit. Much of the deficit

will magically seem to disappear, and nobody will know what you did

for another 50 years when the Boomers begin to retire 2015.

 

Reagan jumped at the opportunity. As did George H. W. Bush. As did

Bill Clinton (although Al Gore argued strongly that Social Security

funds should not be raided, but, instead, put in a " lock box " ). And so

did George W. Bush.

 

The result is that all that money - trillions of dollars - that has

been taxed out of working Boomers (the ceiling has risen from the tax

being on your first $30,000 of income to the first $90,000 today) has

been borrowed and spent. What are left behind are a special form of

IOUs - an unique form of Treasury debt instruments similar (but not

identical) to those the government issues to borrow money from China

today to fund George W. Bush's most recent tax cuts for billionaires

(George Junior is still also " borrowing " from the Social Security

Trust Fund).

 

Former Bush Junior Treasury Secretary Paul O'Neill recounts how Dick

Cheney famously said, " Reagan proved deficits don't matter. " Cheney

was either ignorant or being disingenuous - it would be more accurate

to say, " Reagan proved that deficits don't matter if you rip off the

Social Security Trust Fund to pay for them, and don't report that

borrowing from the Boomers as part of the deficit. "

 

As the Associated Press reported on April 6, 2005:

 

" PARKERSBURG, West Virginia. (AP) -- President Bush on Tuesday

used a four-drawer filing cabinet stuffed with paper representing

government IOUs the president said symbolized the Social Security

trust fund's bleak outlook for meeting Americans' future retirement

needs. ...

 

" 'A lot of people in America think there is a trust -- that we

take your money in payroll taxes and then we hold it for you and then

when you retire, we give it back to you,' Bush said in a speech at the

University of West Virginia at Parkersburg.

 

" 'But that's not the way it works,' Bush said. 'There is no trust

" fund " -- just IOUs that I saw firsthand,' Bush said...

 

" [susan] Chapman [of the Office of Public Debt] opened the second

drawer and pulled out a white notebook filled with pseudo Treasury

securities -- pieces of paper that offer physical evidence of $1.7

trillion in treasury bonds that make up the trust fund. "

 

Later, Senator Rick Santorum made an odd admission for a Republican:

" " You can't pay benefits with IOUs, " he said on the Senate floor. " You

have to pay it with cash. "

 

And where will that cash - now nearly two trillion dollars - come from

over the next decades as Boomers begin to retire?

 

Technically (and legally) it's simple - the Social Security Trust Fund

will give back its IOUs to the Treasury Department and in exchange for

them get cash to pay the Boomers' retirement checks. Practically,

though, it'll be a crisis of biblical proportions. In order for the

Treasury to come up with that kind of cash will require either massive

tax increases or increased massive borrowing - at a time when we're

already borrowing so heavily that China is propping up our economy

with weekly loans.

 

Thus, Bush talks about a " crisis " in Social Security with some

accuracy. But he doesn't dare tell us what the real " crisis " is, or

how Reagan and Greenspan set it up, because when it becomes widely

known that the real crisis is that Reagan set the course to steal

Boomers' Social Security savings, it will destroy the reputation of

both supply-side economics and the Republican Party for generations to

come.

 

That Republicans and " conservative " Democrats have been able to

perpetrate this fraud on America for the past 25 years tracks back to

the initial and ongoing efforts of one man, Alan Greenspan, says Ravi

Batra in his new book " Greenspan's Fraud: How Two Decades of His

Polices Have Undermined the Global Economy. "

 

And the Social Security fraud just outlined is only the beginning.

Batra shows - in extraordinary (and easily understood) detail - how

Greenspan has steadily worked for over two decades to sell out

America's sovereignty and economic interests to those of the

multinational corporations he so loves, and to sell out the working

people of America (and their Social Security Trust Fund) to the

super-rich who Greenspan has always represented.

 

Greenspan manipulated the stock market so his buddies could get rich,

then warned them just in time to get out before it blew up. He's kept

together tax cuts and pay increases for the CEO class by pumping cheap

money into the economy so the Middle Class will go ever deeper into

debt, setting up a housing bubble that could crash in a way that would

make 1929 look like a mild bump in the economic road. And he's helped

engineer and support international " free " trade policies that have

disemboweled America's manufacturing and information technology

sectors, with the happy result for Republicans that the

once-politically-active and heavily unionized middle class is being

replaced by a politically impotent mass of the working poor, too busy

to worry about politics or challenge corporate news.

 

Most people, coming across this massive indictment of Greenspan, would

probably react with skepticism. Why wasn't any of this in the paper?

Why haven't I heard Democrats and liberals attacking Greenspan from

the floors of Congress and in the progressive media?

 

As Batra points out, the truest testament to the power Alan Greenspan

holds is that he's been able to do so much of this behind the scenes.

He gently encourages and nudges, argues and lectures, leaks and

pontificates. He suggests, rather than orders. And, of course, he

holds the levers of the nation's money supply in his hands - making

him a more fearsome threat to a sitting president or political party

than J. Edgar Hoover ever was.

 

And, Batra documents, Greenspan has not been at all reluctant to use

his considerable power to the benefit of those in office.

 

One example: During the Reagan and Bush presidencies, he was in favor

of tax cuts. During Clinton's he was against them. During Bush

Junior's he was again in favor of them.

 

Ravi Batra's book " Greenspan's Fraud " is not only required reading for

all Americans because it so clearly lays out the crimes this man - and

the Republican Party - have committed against the United States of

America, but also because it's such a brilliant primer in

macroeconomics overall. If you never were able to figure out, for

example, what interest rates had to do with unemployment, or how the

rich get richer in America while the poor get poorer, or why when the

minimum wage is increased the economy gets better, Batra explains it

all with elegance, wit, and comfortable clarity.

 

" Greenspan's Fraud " is one of the most important books you can read

this year. Get two copies, because you're sure to have at least one

friend you'll want to read this book, but your own copy will be so

marked up and beloved that you'll not want to let go of it.

 

---> GET YOUR COPY HERE <---

 

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Thom Hartmann (thom at thomhartmann.com) is a Project Censored

Award-winning best-selling author and host of a nationally syndicated

daily progressive talk show. www.thomhartmann.com His most recent

books are " The Last Hours of Ancient Sunlight, " " Unequal Protection:

The Rise of Corporate Dominance and the Theft of Human Rights, " " We

The People: A Call To Take Back America, " and " What Would Jefferson

Do?: A Return To Democracy. "