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Thursday, February 17, 2005

Greenspan on Social Security


When Federal Reserve Chairman Alan Greenspan says he favors adding individual investment accounts to Social Security, he's thinking big picture. Such accounts could serve a macroeconomic and a social good, Greenspan told the House Committee on Financial Services on Thursday. But, he noted for the second time in two days, adding the accounts to the system won't address Social Security's current solvency issues. The increasing concentration of wealth among high earners isn't good for a democratic society, Greenspan said. 'These accounts, properly constructed and managed, will create ... a sense of increased wealth on the part of the middle- and lower-income classes of this society, who have had to struggle with very little capital. 'While they do have a claim against the Social Security system in the future, as best as I can judge, they don't feel as though it's personal wealth the way they would with personal accounts,' he said. 'And I think that's quite important.'
Boil it all down, and this is my biggest reason for supporting these accounts as well. Giving people an individual stake in what is going on and make them more independent of government. Yes, this is an ideological reason, but nonetheless I think it is very sound. Like it or not, the information economy in many ways makes capital even more important than it was in the industrial economy. We are seeing great improvements in productivity, but that is largely a result of up-front capital investments. Update: Honest Partisan has his own thoughts (well actually Paul Krugman and Kevin Drum's thoughts) on Greenspan. I disagree, but your mileage may vary.


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