Alan “Bubbles” Greenspan made some unusually candid public remarks last week at a Federal Reserve clam bake in Jackson, Wyoming. The central bankers were there to talk about what the 77 million baby boomers can expect when we belly up to the public trough for our comfy retirements, “free” medical care and cheap drugs.
The world’s most famous economist had some bad news. It looks like a few promises will be broken. The news is no surprise to him. In his idealistic youth, before he became the overseer of the destruction of the world’s economy, Mr. Greenspan explained how politicians use inflationary deficit spending to clip money from savers and buy votes with it. In his 1966 essay “old and Economic Freedom
G,” he explained the process.
"The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods.
When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.”
The economy’s books are rapidly approaching a point where they must be balanced. Mr. Greenspan’s unusual candor in itself is alarming. Instead of his usual deeply coded ramblings he delivered the news straight out. We are in for some “abrupt and painful” choices. He fears “we have promised more than our economy has the ability to deliver…”
To avoid sudden, intense pain, Congress must admit that the planned fleecing of our children to pay for our snug retirements isn’t going to work out. We either suffer some lesser pain now or watch the system melt down later. Unfortunately, there isn’t much support in Congress for cutting Social Security benefits. The greedy geezers are chronic voters and have no intention of becoming the needy geezers. We sell our votes to the highest bidder even when the bids are made with our children’s money.
Greenspan’s warning reminded me of a cartoon. It was a spoof of the fried egg, “this-is-your-brain-on-drugs” ad. The first picture showed a yummy looking plate of steak and eggs alongside a steaming cup of coffee and a couple slices of buttered toast. The caption read, “This is your retirement.” The next picture was of an open can of cat food set in the center of the same plate. The caption: “This is your retirement on Social Security.” Mr. Greenspan is working the lid off the can of kitty vittles right now. He wants Congress to serve it up to 77 million taxpaying baby boomers. How likely is that?
Social Security and Medicare are the sacred cows of American politics. Having a barbecue or even getting those heifers off the couch will be next to impossible for any politician who values his job, which is to say, any politician. And this in spite of the Congress Critters’ having opted themselves out of Social Security. They get a cushy, full pay, inflation adjusted retirement from the taxpayers after just a single term in office. No Meow Mix for them.
Americans like to think we still have that “right stuff” that made Paine, Jefferson, and Adams defiant, freedom-loving rebels ― men who preferred death to life without liberty. But modern Americans have become fundamentally different creatures. Particularly the last three generations who bear the nine digit brand of the Social Security Administration.
We’ve grown fat and soft since Roosevelt put his mark on us. We’ve been thoroughly trained in government institutions where every day for twelve of our most impressionable years we took a loyalty oath before starting our work. We send our own children to those same compulsory institutions for training. After years of conditioning, when given the choice of liberty or security Americans invariably choose security.
There is apparently no indignity we will not suffer in the name of safety. We remove our shoes on command though we know there are no bombs in our shoes. We allow ourselves, our wives and even our grannies to be frisked by smirking drones. We pretend we are safer for it. Indeed, we must hope we are safer for it, because we’ve also allowed ourselves to be disarmed as completely as prisoners. To protect us from terrorists our government treats us like terrorists ― dangerous sociopaths who can’t be trusted with such lethal tools as nail clippers and hat pins. And we let them.
On the evidence, we are not now the kind of people who would just forget about the promised swag. We are not now the kind of people who would end the Social Security chain letter. We are not now the kind of people who are ready to care for our own parents and save for our own old age. Just as we are not now the kind of people who would insist on carrying arms to defend ourselves against terrorists. But the looming catastrophe that the Fed Chairman is warning us about wouldn’t exist if we were that kind of people.
Mr. Greenspan has finally let the cat out of the bag. We have promised ourselves more than we have or ever will. The world produces. America consumes. The world saves. America borrows. Before long every dime earned by every working American won’t be enough to pay our debts and keep the promises made to the baby boomers.
At some point ― sooner and gradually if we heed Mr. Greenspan’s warnings, a little later and much more abruptly if we don’t ― Americans will have to stop buying things we don’t need with money we don’t have. Once we figure out that political promises are made to be broken, I like to think we will become the kind of people we think we are.
Incremental Social Security benefit decreases, in balance with non-Social Security witholding, personal wealth increases.