Alan Greenspan is supposed to be this long-term thinking guy, but where has he been when Congress passed the Bush tax cuts years ago? He is clearly in legacy-preservation mode.
This from the New York Times today:
Alan Greenspan, chairman of the Federal Reserve, warned on Wednesday that the federal budget deficits were “unsustainable,” and he urged Congress to scrutinize both spending and taxes to solve the problem.
Mr. Greenspan also warned that the deficits could be driven sharply higher by costs connected to the aging of the baby boom generation, particularly entitlement programs like Social Security and Medicare. While reiterating his support for President Bush’s plan to offer private accounts as part of overhauling Social Security, Mr. Greenspan urged lawmakers to tackle the program’s problems now, rather than later.
The assessment was Mr. Greenspan’s gloomiest to date about the government’s budget straits. Unless Congress takes major action to reduce the deficits, preferably, he said, by deep cuts in spending, annual budgetary shortfalls will continue and closing those gaps will become even more difficult.
Greenspan does the nation and his place in American economic history an enormous disservice by commingling discussions of American fiscal solvency and George Bush’s Social Security privatization scheme. Social Security has modest problems that can be fixed with sensible, small scale adjustments. Our Medicare challenges are much larger and deserve attention.
The article goes on:
“The president does have a substantial deficit-reduction package,” said Trent Duffy, a White House spokesman. “His budget is a continuation of that policy, and he looks forward to working with Congress in cutting that spending down. Likewise, the president agrees that the long-term budget is the issue, which is why he’s trying to lead a national discussion and reform movement to save and strengthen Social Security.”
Mr. Greenspan’s comments deepened a long-running disagreement between the Federal Reserve and the White House, and they come at a moment when House and Senate leaders are trying to hammer out a budget resolution or blueprint for tax and spending bills this year.
Mr. Greenspan, a Republican, has long argued that Congress should reinstate rules that would require lawmakers to offset the cost of tax cuts and new spending programs with savings in other areas.
Mr. Bush and his Republican allies in Congress have insisted that any such “pay as you go” restrictions, which existed in the 1990’s, apply only to new spending and not to new tax cuts.
Reinstating the previous budget rules would make it far more difficult, if not almost impossible, for Congress to extend permanently Mr. Bush’s tax cuts of 2001 and 2003.
Extending all of the expiring tax cuts add about $1.8 trillion to the federal debt over 10 years, according to the Congressional Budget Office. That would come on top of a rapid escalation in the federal debt from $3.4 trillion to $4.3 trillion as a result of soaring annual deficits since 2001.
Greenspan may be playing tricks on Bush arguing on one hand that he is for Social Security privatization and personal accounts — while on the other arguing that future spending as well as tax cuts should be offset by other spending reductions, making the President’s scheme virtually impossible to implement.
I didn’t hear Garrison Keillor make the comment, but it was reported to me that he had a great line on Prairie Home Companion not long ago.
Keillor allegedly said something along the lines that he was asked whether he thought George Bush’s four year deficit-reduction plan was headed in the right direction and on target, and Keillor’s reply was that it all depended on the number of countries we invaded and occupied between now and then.
Exactly right. What Greenspan has not said is that we have added to our annual budget roughly a $100 billion Iraq management expense that is not even on the books and being treated as an extraordinary, temporary cost.
There is a lot going on in the Middle East now — and if we are going to play a constructive role — American dollars will be needed to help those committed to change as well.
For all this to happen, Americans will have to sacrifice — and we probably should.
But making no choices. Going to war. Occupying another country. Heading into an era of massive debts. And cutting taxes!?
This is the kind of recklessness that will really erode America’s economy and position in the world.
— Steve Clemons
