Greenspan, as head of the Federal Reserve, was supposed to maintain an economy that supports us all. But Batra says this about Greenspan's approach:
"Greenspan's economics may be abbreviated to Greenomics, which essentially turns out to be Greedomics, signifying a view that nothing should be done to interfere with business greed and the pursuit of profits."
Greenspan believes in rugged individualism and laissez faire. He and Ayn Rand were of the same mind about the virtue of selfishness. I had read some time ago that Ayn Rand said that Big Business is America's "persecuted minority." From Batra I learned that she got that idea from Greenspan.
Greenspan is against regulation of business. He is even against anti-trust laws. He feels the government should not be helping anyone in programs such as Social Security. Most important to him, taxes should be a low as possible.
Greenspan had a big hand in the Social Security brouhaha. Back in 1981 Reagan appointed Greenspan head of a Social Security Commission that was supposed to fix the system. How did he fix it? By recommending the most regressive tax we have ever had in U.S.: the payroll tax, which applies only to workers at the bottom and the middle class. His recommendations became law in 1983. He tried later to reduce worker benefit increases without success. In 2001 he was in favor of Bush's tax cuts and recently for Social Security privatization, even though they both would increase the deficit.
He says he is for low taxes. But he recommends tax cuts to take care of the rich and a payroll tax to take care of the poor. After being for tax cuts for the rich he asked Congress to follow their pay-go approach when legislating for the poor. Then he had the gall to complain about the huge deficit when he had previously recommended the huge tax cuts.
What a flip-flopper! His flip-flops on Social Security and taxes are insignificant compared to what he did with regards to regulation. Greenspan is for DE-REGULATION of business. Everybody knows this. Rich people swoon at his feet because of this. However, Batra tells the story of how when BIG PLAYERS are involved, REGULATION is needed.
In 1997 there was a crash. All sorts of people and businesses were in trouble. Greenspan believes that the market is holy: it will make corrections and the government should not interfere. However, there was an outfit called Long Term Capital Management (LTCM), a highly risky hedge fund for super-wealthy investors. It had "only" $3.5 billion, but borrowed $100 billion to invest. The borrowed money and the $3.5 billion equity disappeared.
What do you think Greenspan did? He bailed out LTCM. Yes, we must have de-regulation. However, we cannot allow such a big, rich, influential company to die.
Batra describes many Greenspan flip-flops. Toward the end of the book, Batra recommends a few reforms, among which are:
- Cut payroll tax
- Raise corporated income tax and eliminate loopholes
- Top tax bracket - 40%
- No preferential treatment for dividends and capital gains
- Raise minimum wage to $8 per hour
- Enforce anti-trust laws and break up conglomerates
- Free trade
- More manufacturing
- Economic democracy
I learned a lot from this book, especially how raising the minimum wage and adopting progressive taxation will increase economic growth. I plan to write about these ideas in future posts.
Everything is covered in a rational way. However, it is not easy reading since you must apply yourself to get the most out of the book. But it is worth your intense attention. You may discover that the economic proposals of Democrats benefit the whole country, not only the rich, as do most Republican ideas.
