Chairman Greenspan
in the lion's den

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The Fed chairman predicted private accounts would be “extraordinarily popular,” and “if they are I think it is a very important addition to our society because, as you know, I’ve been concerned about concentration of income and wealth in this country. ... This, in my judgment, is one way you can address that.”

Schumer on Tuesday gave a “pre-buttal” of Greenspan’s Wednesday morning testimony. His message: Even though Greenspan “is a tremendously respected figure and a great chairman of the Fed and he’s been my friend for a long time,” the public should not heed his advice on Social Security private accounts.

The idea of private accounts for younger workers, Schumer said, “is really a disguise by the ideologues who want to end Social Security, who hate government programs so much that they’ll do anything they can to stop them.”

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Schumer adamant
Greenspan or no Greenspan, Democrats adamantly refuse to negotiate with Bush and congressional Republicans on private accounts. “Until privatization is taken off the table, no progress will be made,” Schumer said.

Greenspan’s testimony Wednesday came the morning after Sen. Lindsey Graham, R-S.C., revealed to reporters that the Fed chairman had been dispensing some helpful advice to him as tries to write a Social Security re-design bill that can gain bipartisan support.

Greenspan’s suggestion to Graham came on the topic of wage-indexing, the method the Social Security Administration uses to determine a retiree’s initial monthly benefit.

Currently Social Security adjusts the retirement benefit for real growth in the value of wages, which means benefits paid to future retirees will be worth more than those paid to today's retirees.

Social Security would save billions of dollars in future years if it switched to a price-indexed calculation, but that would impose a hardship on the worker with a career of relatively low earnings.

A Greenspan-Graham solution?
Greenspan and Graham may have a solution.

“Let’s devise a plan that is very sensitive to low- and moderate-income people,” Graham told reporters. “Instead of changing from wage-indexing to price-indexing or everybody, Alan Greenspan suggested to me that we look at wage growth for low-income workers, $30,000 or under, and consumer price indexing for the rest of us. That gives them (lower-income people) the most aggressive form of benefit growth.”

Voicing his admiration for the Fed chairman, Graham said, “He’s a real smart guy. … I met with him twice, I pick his brain, and he brought this up at the (Jan. 22) Alfalfa Club Dinner. ... He’s been involved with entitlement reform ideas for years.”

Graham said Greenspan “knows how my bill works because I explained it to him, and he said, ‘Why don’t you look at a progressive indexing system?’ And I think it’s a very good idea.”

By advising Graham, one of the key power brokers in the Social Security debate, Greenspan lent his economist’s prestige to the effort to devise a compromise bill that might pass.

Due to Senate filibuster rules which require 60 votes to shut off debate, Graham would need to enlist at least five Democrats to back his bill, assuming he could get all Republicans to support it.

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