The Greenspan view of social security, taxes, deficits, recovery
Worrying about your social security pension? Don't, says Alan Greenspan, the head of a presidential commission that studied the social security system and saw many of its recommendations passed into law by Congress this spring.Skip to next paragraph
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Some analysts still forecast a failure of that system. But Mr. Greenspan, in an interview, said it would take ''a very adverse economic scenario'' to create major financial problems for the retirement-disability side of the social security system. In other words, he views retirees' social security pensions as secure.
He adds, however: ''Unquestionably, medicare has very serious problems. Its financing difficulties are far worse than anything we've confronted in the retirement and disability system.''
Mr. Greenspan served former President Ford as chairman of his Council of Economic Advisers. He's now back with his own firm of economic consultants, Townsend-Greenspan & Co., keeping an eye on the business scene for corporations.
The conservative economist finds much satisfaction with the ''central thrust'' of President Reagan's long-term strategy. He regards the major economic problem of the 1970s as the construction by Congress and the administration of ''entitlements'' (such as antipoverty programs, enlargement of social security, and so on) that will continue to add costs to the federal budget in the 1980s, 1990s, and beyond. The President's program, he says, has succeeded ''in part'' in restraining that growth.
Further, the Reagan program, through its tax cuts and the plan for ''indexing'' of the tax system starting in 1985 to prevent inflation from causing ''bracket creep,'' has limited unlegislated increases in the tax burden that to some degree ''created the politi-cal capacity to expand entitlement and other nondefense programs inordinately.''
In fact, he says, a lower rate of inflation than expected has meant that there has been some real, though small, cuts in marginal tax rates - the tax rate on the last dollar an individual earns.
Mr. Greenspan also cheers the final results of the 1981 and 1982 changes in corporate taxes: These have ''clearly improved the underlying incentives to invest.'' But they will only be ''effectively triggered'' when the federal budget deficit is brought under control.
What's needed now, he says, is further cuts in expenditures, especially entitlements, plus a value-added tax, in order to bring the deficit over the long term ''back into line.'' He would not want to see tax indexing repealed or limited, as some in Congress have been proposing.
However, revenues from the value-added tax, a form of sales tax or tax on consumption, should not be used to finance further spending increases if one of its purposes is to restructure the economy toward greater growth, Greenspan says.
That requires, he believes, a bipartisan agreement in Congess on a joint set of programs addressing both expenditures and revenues. But he views such a solution ''as politically difficult, maybe undesirable even, until after the next presidential election.''