Paul Krugman wrote this piece in June of 2004, but it needs to be reviewed now that Bush has put his social security privatization plan in the budget.

Before Greenspan became Fed chairman [in 1983], he headed a commission that recommended changes in Social Security to secure its future. The most important recommendation, adopted by Congress, was for an increase in the payroll tax — a regressive tax that falls much more heavily on lower- and middle-income families than it does on the well-off. The ostensible purpose was to generate a surplus within the Social Security system, building up a trust fund to pay benefits once the baby boomers retire.

That was the bait; now Greenspan has pulled the switch. The sequence looks like this: he pushed through an increase in taxes on working Americans, generating a Social Security surplus. Then he used the overall surplus, mainly coming from Social Security, to argue for tax cuts that deliver very little relief to most people but are worth a lot to those making more than $300,000 a year. And now that those tax cuts have contributed to a soaring deficit, he wants to maintain the tax cuts while cutting Social Security benefits. He never said, ”Let’s raise taxes and cut benefits for working families so that we can give big tax cuts to the rich!” But that’s the end result of his advice.

Why did he do it? There are two possible interpretations. The more generous one is that he never gave up the ideals of his younger days. Into his 40’s, Greenspan was an acolyte of Ayn Rand, the libertarian novelist and philosopher, and Greenspan has never repudiated his Randian association. Nonetheless, during the Clinton years he came to be viewed as a moderate. Maybe that was a mask, and all those years he was just waiting for an opportunity to use the prestige of his office to undermine the hated institutions of the welfare state.

The less generous interpretation is that Greenspan simply abused his position to help his friends. Kenneth Thomas, a finance professor at the Wharton School, has calculated that Greenspan visits the White House about once a week, as The Christian Science Monitor reported last month, and that is almost four times as often as he did when Clinton was president.

Part of the genius of George Bush’s political operatives is their ability to persuade people (Colin Powell, Tony Blair) to betray their principles, to say and do things they will later regret, in support of a presumed shared cause. Paul O’Neill, Bush’s first treasury secretary, falls into the same category: he was a moderate Republican who for a time played good soldier, defending the Bush tax cuts despite private qualms, to help the new president — a man he thought shared his values — by giving him an early political victory. And guess what: O’Neill was a close friend of Greenspan’s.

According to Ron Suskind’s book ”The Price of Loyalty,” written with O’Neill’s cooperation, Greenspan told O’Neill that a tax cut without triggers — that is, conditions that would cancel the cut if projected surpluses didn’t materialize — was ”irresponsible fiscal policy.” Yet Greenspan never made a forceful public case against a trigger-free tax cut, perhaps because he did not want to make trouble for his friend O’Neill. And by the time he realized just how irresponsible the tax cut really was, he was trapped — too deeply associated with the administration’s policies to change course without losing face.

Either way, Greenspan did something remarkable. After becoming a symbol of America’s economic turnaround in the 90’s, and anointing himself the nation’s high priest of fiscal probity, he lent crucial aid and comfort to the most fiscally irresponsible administration in history. In the end, that will be his most important legacy.

So, to review: Greenspan recommended the taxing of lower- and middle-income Americans to fund social security. These increased taxes from the 1980’s to the year 2000 resulted in a build-up of a trust fund. Then Greenspan recommended tax cuts for the wealthy. These tax cuts resulted in a depletion of the trust fund to pay for social security. And now the President wants everyone to buy into cuts for social security, because he has given away in tax breaks all the money that lower- and middle-income people worked for 20 years to build up.

Can I scream now?