Dr. Greenspan's latest testimony was thoroughly disturbing and I would like to respond to it more completely but for now I can only post the following in response to the link:
However, by almost any measure, the required amount of saving that would be necessary is sufficiently large to raise serious questions about whether we will be able to meet the retirement commitments already made. Much has been made of shortfalls in our private defined-benefit plans, but the gross underfunding currently at $450 billion, although significant as a percentage of the $1.8 trillion in assets of private defined-benefit plans, is modest compared with the underfunding of our publically administered pensions.
So what is Dr. Greenspan saying here? Relative to the rip off of the public by their employers, the government rip off isn't as bad?
At present, the Social Security trustees estimate the unfunded liability over the indefinite future to be $10.4 trillion. The shortfall in Medicare is calculated at several multiples of the one in Social Security. These numbers suggest that either very large tax increases will be required to meet the shortfalls or benefits will have to be pared back.
It looks like the link I've posted several times in the past interview (requires Real Player) with Mr. Lawrence Kotlikoff turns out to be quite acurate.
Because benefit cuts will almost surely be at least part of the resolution, it is incumbent on government to convey to future retirees that the real resources currently promised to be available on retirement will not be fully forthcoming. We owe future retirees as much time as possible to adjust their plans for work, saving, and retirement spending. They need to ensure that their personal resources, along with what they expect to receive from government, will be sufficient to meet their retirement goals.
What I read here is that Dr. Greenspan is suggesting that congress tell the people that the government isn't going to keep its promise of return on the investment workers have made all of their working lives and the sooner the better. Yet our government fully intends to continue taking our dollars out of every pay check to fund the promise that they now can no longer keep.
In other words, we the government made a promise to you, the poor working sap, that we will take your money and give it back to you when you need it. But now we see that there is no way we can keep our promise so we have a responsibility to tell you that you are screwed as soon as possible so you can adjust your expectations. But we're going to continue taking your money. Where's the outrage?
If Dr. Greenspan is so concerned about our "personal resources being sufficient to meet our retirement goals, then why does the government continue to take them from us? Why does the Fed maintain a policy of low interest rates that encourages further debt rather than savings? Why is there rampant inflation as a result of Fed policy that encourages people to spend today because tomorrow their dollars will be worth less? Why has the Fed created the biggest housing bubble in history so people can take out home equity loans that enables them to consume more stuff and at the same time, acquire further debt?
During the first Bush administration, Secretary of Treasury Paul O'Neil commissioned a study to determine the extent of the unfunded liabilities of the US and discovered it was $44 trillion dollars (today it's about $55 trillion). Upon making the administration aware of this crisis, he was dismissed. Paul O'Neil was a good man (ex CEO of Alcoa) but a lousy politician. You see, were his findings to become public knowledge, Bush may not have been reelected.
Now that Bush is in his second term, the timing is more appropriate to let the word out in a "kinder and gentler" way. According to Dr. Greenspan, the shortfall in Medicare is calculated at "several multiples of the one in Social Security". Good luck America.