At Last, an IMF Setback!/Social Security Jude Wanniski and David Gitlitz April 24, 1998

On January 2, 1997, we ran a list of the “Top Ten Most Evil Men in the World” on our website, with IMF Director Michel Camdessus at the top of the list and his co-director Stanley Fischer, the erstwhile MIT economist, second on the list. By “evil” we made clear that they are pure of heart, kind to children and old ladies, and will no doubt get through the Pearly Gates some day, but that the policies they push around the world have the effect of inflicting great miseries, starvation, disease and civil war on literally billions of people. Six months later, with the help of Fed Chairman Alan Greenspan’s dollar deflation, the Camdessus/Fischer team was piling on the people of Thailand, kicking off the Asian crisis that was the most Evil Event of 1997. Now, thanks to several people who banded together to stamp out this evil influence, the Evil Empire has been set back for the first time in its 54 years of existence. In order of congratulations, the men on white horses include: 1) Jack Kemp, who last fall called for the removal of Camdessus on the grounds of incompetence; 2) Kemp’s old friend, Senate Majority Leader Trent Lott, who early this year signaled his displeasure with the “policy and personnel” of the IMF; 3) Former Secretary of State George Shultz, former Secretary of Treasury William Simon, and former Citicorp president Walter Wriston, who together wrote a February 3 WSJournal op-ed, “Who Needs the IMF?”; 4) House Majority Leader Dick Armey, who decided to join this band and argue against the IMF’s request for another $18 billion in funding; and 5) Bob Bartley of the WSJournal, who ran a string of anti-IMF-policy editorials. The funding got through the Senate with no trouble, but Armey’s attack won the day in the House, which last night stripped the $18 billion from a bill that it then passed and stuck it on a bill that won’t come to a vote until September. House Speaker Newt Gingrich, the last GOP leader to come aboard, will try to trade the money for an IMF promise not to use money for abortion financing in poor countries. Kemp, Lott and Armey are after the big fish: Camdessus. If the big bank and farm lobbies want the money, they will argue, there should be changes in personnel and policy. Kemp is pushing Mexico’s former finance minister, Pedro Aspe, for the job.

Jude Wanniski

SOCIAL SECURITY: Today’s Wall Street Journal column by Paul Gigot is yet another example of the GOP’s propensity for self-immolation on the Social Security issue. Gigot anoints Sen. Bob Kerrey as the New Democrat visionary for his co-sponsorship of Pat Moynihan’s Social Security “reform” proposal: Individuals could build wealth rather than rely on federal transfer payments. The Kerrey-Moynihan proposal would further this end, Gigot gushes in his praise, through its two-percentage point cut in the payroll tax, with the proceeds being used to establish personal retirement accounts. In the zero-sum world of Social Security, though, cutting the payroll tax means taxes must be raised elsewhere or benefits must be cut. Kerrey-Moynihan does both. It both restricts the cost-of-living adjustment to one-point below CPI and applies the same treatment to the indexing of income-tax brackets! It would also raise the retirement age, now set to rise to 67 in about 25 years, to 70 in the second half of the next century. To top it off, the widely touted two-point cut in the 12.4% payroll tax would be maintained only until 2024, and then would rise to 13.4% in 2060. The last time the GOP proposed a COLA cutback, in 1986, it lost the Senate. This looks like another trap. Kerrey and Moynihan are mavericks who, while unafraid to stake out ideas outside the Democratic consensus, often end up retreating and licking their wounds when the party mainstream balks. If the GOP follows Gigot’s advice, it could lose the House this year.

David Gitlitz