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Greenspan warns against deficits

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  • #2
    Kerry is proposing spending cuts isn't he?
    Asked what he would do differently in Iraq, Kerry said, "Right now, what I would do differently is, I mean, look, I'm not the president, and I didn't create this mess so I don't want to acknowledge a mistake that I haven't made."

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    • #3
      Sure wish somebody does.
      Un-Official Sponsor of Randy Choate and Kevin Siegrist

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      • #4
        It's an upside down world when the Democrat wants to cut spending and the Republican is spending like it's growing on trees.
        Sponsor of Alex Pieterangelo.

        ..."I spent a lot of money on booze, birds and fast cars. The rest I just squandered." George Best

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        • #5
          Originally posted by hkyfan@Feb 25 2004, 12:27 PM
          It's an upside down world when the Democrat wants to cut spending and the Republican is spending like it's growing on trees.
          What democrat has said he wanted to cut spending?
          Asked what he would do differently in Iraq, Kerry said, "Right now, what I would do differently is, I mean, look, I'm not the president, and I didn't create this mess so I don't want to acknowledge a mistake that I haven't made."

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          • #6
            Originally posted by hkyfan@Feb 25 2004, 12:27 PM
            It's an upside down world when the Democrat wants to cut spending and the Republican is spending like it's growing on trees.
            Hcky,

            Can you identify those candidates for me, I may not have been following close enough?
            Un-Official Sponsor of Randy Choate and Kevin Siegrist

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            • #7
              Originally posted by BurnKU+Feb 25 2004, 12:29 PM-->
              QUOTE(BurnKU @ Feb 25 2004, 12:29 PM)

            • #8
              It may actually be a benifit to have a Democrat in the White House and a Republican controlled c0ongress. Afterall, while Clinton was president, we actually saw a balnced budget, and a surplus.
              Make America Great For Once.

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              • #9
                Originally posted by hkyfan+Feb 25 2004, 12:35 PM-->
                QUOTE(hkyfan @ Feb 25 2004, 12:35 PM)
                Originally posted by [email protected] 25 2004, 12:29 PM

              • #10
                Democratic presidential contenders on Wednesday condemned Federal Reserve Chairman Alan Greenspan's warning that future cuts in Social Security and Medicare spending will be necessary.
                Un-Official Sponsor of Randy Choate and Kevin Siegrist

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                • #11
                  Greenspan sees red

                  Feb 26th 2004
                  From The Economist Global Agenda


                  Deficits do matter, says the Federal Reserve chairman. But not enough to start raising taxes








                  THE tax cuts George Bush enacted in 2001, 2002 and 2003, though large, were not permanent. Most contain “sunset clauses”, and are scheduled to expire over the next five years. But will the sun ever set on Mr Bush’s tax cuts? Some in Washington think the cuts should be extended because, after all, deficits don’t matter. Alan Greenspan is not one of them. In his testimony to the budget committee of the House of Representatives on Wednesday February 25th, he noted the “growing concern” about the federal budget. Nonetheless, he also voiced his support for making Mr Bush’s tax cuts permanent. The monetary maestro has waded into matters fiscal. And neither side of the House knows whose side he is on.

                  Owlish in appearance, Mr Greenspan is, by temperament, a deficit hawk. But he is a very long-sighted hawk. Right now, he points out, the budget deficit—$375 billion last fiscal year and expected to grow to more than $500 billion this year—is providing valuable support to the American economy as balance sheets are repaired and excess capacity worked off. Even in the medium term, he said in reply to a congressman’s question, deficits of $400 billion-500 billion would represent a manageable share of a larger national income. He thinks the market has already priced in deficits of this size for the next ten years. Mr Greenspan’s real worries are long-term. He believes the American government has over-committed itself to an ageing population. As the ratio of workers to retirees falls from 3.25 to 1, as it is now, to just 2.25 to 1 by 2025, the burden of pensions will rise remorselessly; the cost of health care incalculably.

                  To raise taxes sufficiently to meet these commitments would stifle growth and erode the tax base, Mr Greenspan fears. Because raising taxes is dangerous, the Fed chairman believes that Congress should lower them, by extending Mr Bush’s tax cuts into the future. This non sequitur has been gratefully received by the Republican side of the House. But Mr Greenspan combines this recommendation with another: that Congress reinstitute the “pay-go” rules of the 1990s, which require that tax cuts be matched by spending cuts. This recommendation goes down less well with Republicans.

                  If the budget-setting congressmen who heard Mr Greenspan’s testimony on Wednesday were to take his words to heart, how would they go about their business for the rest of the decade? Extending the tax cuts, as Mr Greenspan recommends, would cost the Treasury $1.7 trillion over the next decade, according to the Brookings Institution. If nothing were done on the other side of the ledger (ie, if real spending per head were held steady) the budget deficit for the year 2014 would stand at $687 billion, the think-tank calculates. But under Mr Greenspan’s pay-go logic, these tax cuts would have to be matched by cuts in spending. Where would the cleaver fall?

                  The Brookings Institution identifies some choice cuts of corporate pork, politely referred to as commercial subsidies, the removal of which could save the federal government $137.5 billion. For example, air traffic control could be privatised, agricultural prices left unsupported, and fossil-fuel research left to the oil companies. Brookings reckons the federal government could save another $123 billion by leaving education, housing, training, local law enforcement and environmental protection to states and localities. Abolishing manned spaceflight, slowing the growth of the National Institutes of Health and putting the screws on discretionary spending could save a further $56.5 billion. In all, the Brookings budget wonks find $326 billion-worth of savings for the year 2014: no small chunk of change, but not even close to what is needed to balance the budget.

                  Which is a pity, because the budget outlook only worsens from then on (see chart). As the baby boomers retire, the Office of Management and Budget reckons spending for Social Security will rise from 4.2% of GDP in 2010 to 6.2% by 2040. Spending on Medicare and Medicaid—health-care benefits for the old and poor respectively—is harder to forecast because the costs of new treatments are unpredictable. Nonetheless, on quite conservative assumptions, Medicare and Medicaid expenditures combined will rise from 4.6% of GDP in 2010 to 10.1% in 2040. These projections, said Mr Greenspan, are both vivid and sobering.

                  Mr Greenspan believes legislators will eventually have no choice but to tamper with health benefits and Social Security. He suggests that retirement benefits might be restrained by stealth, by linking them to a less generous measure of inflation. The “chained” consumer price index he favours adapts to changing patterns of spending. According to this index, the cost of living has risen by just 1.8% in the past three years, rather than the 2.2% rise recorded in the official consumer price index.

                  Congress may not follow Mr Greenspan’s advice. But perhaps it should heed his example. The best and perhaps the only way to relieve the impending pensions burden is to postpone the retirement age. Mr Greenspan, for one, is 78 next week and still going strong.
                  Un-Official Sponsor of Randy Choate and Kevin Siegrist

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                  • #12
                    Alan Greenspan will go down in history as the man responsible for the biggest financial calamity in US (world?) history...it is just now beginning to play out...his pontifications on deficits and Fannie and Freddie and the wonders of ARMs and productivity are beyond the pale.

                    Moe
                    The Dude abides.

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                    • #13
                      Originally posted by Moe_Szyslak@Feb 26 2004, 04:22 PM
                      Alan Greenspan will go down in history as the man responsible for the biggest financial calamity in US (world?) history...it is just now beginning to play out...his pontifications on deficits and Fannie and Freddie and the wonders of ARMs and productivity are beyond the pale.

                      Moe
                      on the scale of the great depression or argentina's collapse?
                      Un-Official Sponsor of Randy Choate and Kevin Siegrist

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