Art Philip Burke
On March 5, Federal Reserve Board chairman Alan Greenspan testified before the House Banking Committee’s Subcommittee on Domestic and International Monetary Policy. Representative Bernie Sanders of Vermont, the only avowed socialist in Congress, sat on that subcommittee, and he made the most of his opportunity.
Bernie Sanders: Thank you, Mr. Chairman, and welcome, Mr. Greenspan. Thank you for joining us today. I have respect for you personally. I have very, very strong disagreements with your policy. It’s incomprehensible to me that President Clinton would have reappointed you, in fact.
Mr. Greenspan, like every American, you are entitled to you political views. And according to newspaper reports over the years, you have made political contributions to Jesse Helms, to George Bush, to Bob Dole. You served on the committee to reelect or elect President Reagan, as I understand it. And of course, you worked as a key economic advisor for President Nixon and President Ford.
And I respect that. There’s nothing wrong with it. We’re all entitled to our points of view.
In 1985, as I understand it, you served as a consultant to many in the savings-and-loan industry. According to Time magazine, you suffered your “greatest embarrassment in 1985 when, as a private economist, you wrote letters to regulators in Congress endorsing Charles Keating and his Lincoln Savings and Loan. Lincoln subsequently collapsed at a cost to taxpayers of $2.6 billion, and Keating landed in jail.”
You also served as a consultant for fifteen other savings and loans, fourteen of which eventually failed.
In your confirmation hearings one year ago, despite the fact that the minimum wage of $4.25 was at its lowest point in forty years and millions of people were working for $4.25 an hour, you noted your opposition to raising the minimum wage.
This January, you told the Senate Budget Committee that “the appropriate capital-gains tax is zero.” Currently, many Senate Republicans are calling for a capital-gains tax cut.
According to the Center on Budget and Policy priorities, 70 percent of the benefits of that tax cut will go to households earning over $100,000 a year.
Mr. Greenspan, I will grant you consistency in your support for trickle-down economics. In your career up to today, it is clear that you have advocated tax and monetary policies which have benefitted the very richest Americans while at the same time your views reflect policies that come down very heavily on the middle class, and low-income people.
In 1983, you were appointed to chair, as I understand it, the Social Security Commission. Under your leadership, the highly regressive payroll taxes increased by about $200 billion. You chose to solve the Social Security crisis by raising the payroll tax on working Americans while at the same time, as an economic advisor, you advocated huge tax decreases for the richest people in America.
Now currently, you are the proponent of reducing the Consumer Price Index. I have neighbors and friends and elderly people who are trying to survive on $7,000 or $8,000 a year.
And I regard it as horrendous and vulgar, to be frank with you, that there are people in government who want to balance the budget on the weakest and most vulnerable people in this society, and then advocate huge tax breaks for the richest people in this country, as you continuously do.
In my state, it gets twenty below zero. Elderly people can't afford to heat their homes. Maybe you’ll tell this committee the last time you have sat in a room with low-income senior citizens and asked them how they’re going to survive if they lose $100 a month in their Social Security benefits.
People in my state are working two and three jobs just to survive, because their wages have not kept pace with inflation.
And I want to ask you what your policies are doing for the middle class, for the working class, for low-income people rather than the wealthy people, who I think you end up representing?
Mr. Greenspan, the United States of America today—not all through your work but through the help of a lot of other people, both parties—has the most unfair distribution of wealth and income in the industrialized world.
The richest 1 percent of the population owns 42 percent of the wealth, more than the bottom 90 percent. In 1976, the wealthiest 1 percent owned 19 percent of the wealth. So we’ve seen the upper 1 percent more than double the percentage of the wealth in this country that they own.
You talk about economic growth. Between 1983 and 1989, 62 percent of the increased wealth in this country went to the richest 1 percent. You can have all the growth that you want, but the middle class continues to shrink.
Does this concern you, the fact that we today have, by far, the most unequal distribution of wealth and income in the industrialized world? And what do you intend to do about it?
Alan Greenspan: Yes, the answer is it does concern me. It’s not clear to me what monetary policy can do to alter that in any material way.
Sanders: OK, Mr. Greenspan, from your point of view, the economy is doing “very well.”
Greenspan: That is correct.
Sanders: I’d love to take you to the state of Vermont, where you can talk to working families where workers are working two or three jobs trying to pay their bills, where women who would prefer to stay home with the kids are now being forced to work, where jobs in our economy which used to pay $15 an hour in manufacturing are now paying $5 an hour for McDonald’s.
But more importantly, during the past twenty years, we have seen a decline in wages or stagnation for 80 percent of all American families, while the people on top have never had it so good. Twenty years ago, American workers were the best compensated in the world. Today we rank thirteenth in the world.
In 1973, the average American worker earned $445 a week. And twenty years later, in 1993, that worker was making $373 a week. Please tell the working people of this country how the economy is doing so good for them as opposed to the very rich who have never had it so good.
Greenspan: Congressman, at any time throughout our history, there have always been areas in our economy which are doing far less well than others. All we can measure is the average changes, and I can suggest to you that in terms of the average changes, the economy by any measure we have available to us is doing well.
Sanders: But Mr. Greenspan, isn’t the concept of average change totally meaningless? If you make $1 million a year and I make $10,000 a year, on average, we’re making a little bit more than $500,00 a year. You’re doing very well. I’m dead broke.
And doesn’t this whole “on average” concept perpetuate a fraud when the vast majority of the people in this country have seen a decline in their wages, are working longer hours, and when the new jobs that are being created are terribly low-wage jobs? So what are we talking about average?
Sanders: If the rich are getting richer…
Greenspan: First of all…
Sanders: …that distorts the whole figure.
Greenspan: …Let me question your data. It is not true that the vast majority of people have lower wages at this stage.
Sanders: You question the statistics that I gave you?
Greenspan: I do, I do, indeed.
Sanders: What do you believe? Do you believe that the working people of this country have seen higher wages?
Greenspan: No, I’m just saying you said the vast majority.
Sanders: That’s right.
Greenspan: That’s a number which means 60, 70 percent?
Sanders: I have said that in 1973, the average American worker earned $445 a week. Twenty years later, that worker was making $373.
Greenspan: You are using BLS’s [the Bureaus of Labor Statistics] payroll-employment figure and the average hourly earnings associated with that. The figure is questionable, I must tell you that.
Sanders: Why do think it is questionable, sir?
Greenspan: Well, it’s questionable basically because of the fact that those data are not produced in an appropriate sample. The employment figures are, but not the wages, and they’re not revised. The Bureau of Census has got altered data, which they do on a more scientific basis, which are far less pessimistic than those stats.
Sanders: The Labor Department—I believe it was the Labor Department—came out recently with statistics which say that for high-school graduates who are entering the labor market, for young men, the wages are 30 percent less than they were fifteen years ago. For women, I believe it was 27 percent less.
Significant drop in wages for high-school graduates. Is that also not a good figure?
Greenspan: No, I can believe that figure.
Sanders: Well, given that reality, what about the figure that the inflation-adjusted median income for young families with children plunged 32 percent between 1973 and 1990? Meanwhile, we have seen a proliferation of billionaires going from twelve to 135 from 1982 to today. Do you really deny that while the wealthiest people in this country have never has it so good, the vast majority of the people have seen a decline in their standard of living?
Greenspan: The Consumer Price Index, which is employed to deflate those data, is precisely the index which I’ve been arguing is mis-specified. If you make the appropriate adjustments, that trend, the decline disappears. Nonetheless, I grant you that it’s pretty stagnant.
Sanders: I would simply say—I would welcome you—please give me a ring. You come to the state of Vermont with me, and I will take you around our state. And I would love to hear the response when you tell the working families of our state that the economy is doing well.
It is not doing well for the middle class, for the working class. Maybe for upper-income people, but not for the vast majority of people.
Mr. Chairman, thank you very much. Thank you, Mr. Greenspan.
This piece was originally published in the June 1997 issue of The Progressive Magazine.