Alan Greenspan is today more than just the powerful chairman of the Federal Reserve, whose every utterance can send stock markets soaring or swooning and aftershocks rippling through the global economy. Whether one approves or not, he’s become a sort of grandfatherly gadfly, frequently straying from the dry, esoteric business of tweaking interest rates and micromanaging monetary policy to lecture the nation on broader but related issues. He’s become an all-purpose economy doctor, not just standing ready to prescribe a little something if the patient gets a fever or the chills, but suggesting preventive measures designed to fend off more serious maladies.
Not long ago, during one of his periodic visits to Capitol Hill, the chairman warned of the threat to the economy posed by natural gas supplies not keeping up with demand, and specifically cited the lack of U.S. port facilities for handling liquid natural gas imports as a situation needing attention. His recent lecture on the Social Security system’s looming collision with a demographic tidal wave — as a surge of retiring baby boomers begin to make claims that will rapidly exhaust the trust funds without a reduction in benefits or an increase in taxes — was about as welcome in Washington as an unemployed lobbyist.
Greenspan said mounting claims on Social Security and Medicare by an aging populous meant “we will eventually have no choice but to make significant structural adjustments in the major retirement programs,” and suggested two steps that wouldn’t prevent but could slow the day of reckoning. He suggested pegging increases in Social Security benefits to the true rate of inflation, instead of using a Consumer Price Index that tends to overstate the actual cost of living. He also suggested raising the retirement age to reflect the fact that Americans are living longer, healthier lives.
Curtailing the size and costs of other government programs is an alternative that wasn’t much discussed in Greenspan’s Social Security speech. Nor did the idea of at least partially privatizing the system, or returning a portion of Social Security funds to Americans for investment in personal retirement accounts, get much attention. Neither of Greenspan’s proposals, in fact, were original. But his highlighting of this always-volatile issue in the midst of a presidential race served an important purpose, flushing the candidates out on a subject they’d much rather avoid.
Not wanting to stir up a powerful voting block, the top Democrats in the race were quick to distance themselves from Greenspan’s counsel. “No matter what was said in Washington just this morning, the wrong way to cut the deficit is to cut Social Security benefits,” said Sen. John Kerry. “If I’m president, we’re simply not going to do it.”
And Kerry’s rival for his party’s nomination, Sen. John Edwards, said it was an “outrage” that Greenspan would advocate potential benefit reductions while backing an extension of the president’s tax cuts. The president, too, failed to take Greenspan’s bait.
Speculation continues to swirl that the chairman won’t seek reappointment when his term expires in June. But like him or not, Greenspan’s ability and willingness to serve as a gadfly will be missed. Although not every medicine the economy doctor prescribed is to our liking, and his bedside manner occasionally needs work, there’s no question that he’ll be credited, on balance, with having done an admirable job of keeping a sometimes ailing U.S. economy from slipping into a coma.