Editorial Page Section - Page A5
July 29, 1996 Opinion Editorial Essay
END OF MONEY AS HE KNOWS IT!
by Howard Hobbs, Ph.D., Economic Editor, The Daily Republican Newspaper
SACRAMENTO - Testifying before the Senate Banking Committee, the chairman of the Federal Reserve, Alan Greenspan admitted that the Fed has a $3.7 Billion secret "surplus" account. Greenspan's account ledgers also contain fundamental reporting errors. It was only last month that Clinton reappointed Greenspan to a new tenure as head of the Federal Reserve. To correct the faulty condition of the books, Greenspan said he recently spent more public funds to hire a non-government accounting firm to audit the books.
In light of this revelation, there is considerable doubt that Greenspan has the capacity to hire independent auditors to probe his own record keeping and accounting practices. Questions are surfacing on the street that Clinton failed to properly evaluate the performance of Greenspan and failed to audit the Greenspan accounting and banking practices prior to re-appointing him to head the Federal Reserve Bank for another term.
The fiscal problem at the Fed came to light recently when the GAO report revealed the Fed improperly expended public funds for such spending as construction, contracting, procurement and personnel. It also said that the Fed's annual operating expenses rose 50% to $2 billion between 1988 and 1994, and that the Fed has $3.7 billion accumulating in a secret "surplus" account. When pressed to explain why Greenspan has a secret bank account for "surplus" funds, he said that money "... could be safely reduced or returned to the Treasury."
Greenspan's accounting and spending practices have not been subject to audit nor to close scrutiny by president Clinton. Greenspan's explanation of his conduct is an arrogant challenge to the authority of Congress.He says he should be judged "... in the context of risk management and that reducing or eliminating the capital bank account could hurt the Fed's effectiveness."
Scrutiny of Greenspan's cash-management practices in the California branch of the Federal Reserve Bank of San Francisco [ The FED] was especially egregious with allegedly doctored cash reports sent to the Fed in Washington containing discrepancies totaling billions of dollars. According to Clinton's chairman of the Fed, "Not to worry!"
Greenspan admitted to Congress that his faulted accounting methods translate into faulty Fed forecasts of future currency demand. He was right about that! Such errors cause an increase to the Fed's order to the Treasury to print new currency to cover Fed accounting errors!
The Clinton welfare state has serious flaws and limitations. Least among these seems to be the sins of the chairman of the nation's Central Bank. The Fed chairman has been allowed by president Clinton to accumulate $3.7 Billion dollars in a "secret" surplus bank account. When caught in the act, the chairman tells the Congress he needs the money!
It is the end of money! Greenspan says, if required to, he will return the $3.7 Billion to the Treasury, but, without that "cushion" things will be a little tight at the Fed!
This most recent of the Clinton fiasco agenda points out a fundamental nightmare of American taxpayers. Look, Greenspan is in charge of the nation's monetary policy. Greenspan is the bureaucrat who runs the money! He sets the bank's prime discount-rate on overnight loans. He not only sets it, he stacks it, wraps it, maps it, and, as we just found out, he banks a lot of the "surplus money" here and a little there, just for emergencies. After all, the president isn't going to miss a billion here and there? Just how Greenspan gets hold of "surplus" money in the first place is the question of the moment that Congress forgot to ask him last week!
There is no longer any question that the Welfare State has crashed in the U.S. and in the rest of the industrialized world, where it has flourished for so many decades. Bill Clinton's 1992 promise to "end welfare as we know it" was a signal for the end of money, not the termination of welfare politics.
In Germany, for example, the difficulty is seen as mainly economic. Chancellor Helmut Kohl recently approved a modest reform program to try to reduce sick pay, unemployment compensation and health care benefits, mainly with an eye to cutting labor costs and making German industry more competitive.
The American political problem is of a somewhat different nature. The European welfare state programs are largely generalized and available to all. The Clinton Welfare State is more directed to those of limited economic means. It has grown from Conservative compassionate relief into Liberal patronage raising central political issues of what Clinton regards as "fairness."
Public opinion is widely expressed by working tax payers in disgust of able-bodied individuals who, by choice, are living on public support. The Liberal Clinton administration bargains for the votes of public assistance beneficiaries because they have suddenly become a potential voting block of twenty million and growing.
There is recent demographic evidence that welfare assistance contributes to the accelerations of childbirth out of wedlock and the break-up of families, youth crime and delinquency. The pathology of welfare dependency on food stamps is the natural consequence of the end of money phenomenon of the Clinton Welfare State.
Conservatives often depict welfare reform as a type of budgetary issue, ignoring its profound social and political implications. If Conservatives fail to recognize the end of money and its New Welfare State consequences they will be facing an incumbent president Clinton in November!
Because it is the end of money does not mean it is the end of the New Welfare State. It does not mean that the politics of compassion is dead. Every advanced society has some type of safety net for the poor. But, American compassion has become bitter and its chances of making a recovery are slim to none, under a Clinton incumbency. In the New Welfare State selling votes for food stamps will just be another Liberal "get-out-the-vote campaign." Its the end of money as William Jefferson Clinton and Alan Greenspan know it!
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