Alan Greenspan On The Ryan Plan, Increasing The Debt Ceiling, And Raising Taxes
Former Fed Chairman Alan Greenspan gave a wide-ranging interview on CNBC this morning that was far from comforting:
The debt and deficit problem in the US is so serious that former Federal Reserve Chairman Alan Greenspan finds himself in the position of recommending the highest tax rates in more than a decade.
In an interview with CNBC, the former central bank chief described himself as a “small government, free-market economist” who nonetheless believes that in order to raise revenue and close the debt gap, 1990s-era taxes must be reinstituted.
It’s a measure, he said, of how serious the problem has become.
“The fact that I am in favor of going back to the Clinton tax structure is merely an indicator of how scared I am of this debt problem that has emerged and its order of magnitude,” he said.
Greenspan also had kind words for Paul Ryan’s Path To Prosperity, but made the same point that I have repeatedly that there’s simply no chance that it can make it through Congress:
He also endorsed the deficit cuts from Rep. Paul Ryan (R.-Wisc.) that have run into strong opposition due to targeting Medicare and Medicaid.
“If I had my own way, I like the Ryan budget in all respects and I think that essentially that sort of thing is what I would vote for if in fact we’re voting,” he said. “But the problem essentially is that is not going to get a majority vote in Congress or be signed by the president of the United States. The question is, what’s my fallback position?”
Telling America’s aging population that its entitlement programs such as Social Security and Medicare will survive without significant changes is dishonest, Greenspan added.
“It’s not an issue of saying we’re going to have a choice for what we’re going to do. We don’t have the physical resources,” he said. The government is telling people “they’re guaranteed their medical services, and I think that’s not accurate. We cannot do that granted our lack of resources.”
Greenspan also said that Congress has to raise the debt ceiling, but seems to endorse a combination of spending cuts and tax increases to get the budget under control. Too bad Congress likely won’t listen to him.
All in all it was an interesting, somewhat sobering interview well worth your time:
Here’s my take on this: In the last election cycle, everyone was clamoring for people to fix the unemployment situation (remember “jobs, jobs, jobs”?), and that’s what the GOP campaigned on. The problem is – fixing unemployment requires companies to spend money on things like hiring people and paying them living wages, and they don’t want to do that. So instead, it suddenly became all about the deficit. But now it’s looking like fixing the deficit (or at least carrying through on their threats about the debt ceiling) will cost money as well, so the GOP is trying to find a way to back out of this argument too. Neither problem would be a crisis for us though if Obama could be even the slightest bit proactive about anything that actually affects anything else – instead he just seems to react to whatever the Repubs do. He occasionally wins tactical victories, but ultimately we’re all t he ones who are losing the war…
Heavens to Betsy! He’s so scared that he’s willing to go back to the horrible Clinton tax rates that produced that frightening budget surplus and accompanied a terrifying economic boom.
Why, he’s so scared he’s putting common sense ahead of ideology! Yikes!
Why should we listen to him — he got most of the past fifteen years wrong — got to cut taxes and run big deficits to spend down the surplus as it would be horrendous to have a very small structural publicly held debt — so let’s cut taxes using the Bush plan and assume that everything will come out roses….
The market is self-correcting, no way will large, well capitalized banks and I-banks encourage a housing bubble as they’ll lose too much money.
Let’s privatize Social Security so my class can renege on the intergenerational and inter-class deal of 1983 as we all know individuals are great at investing (despite the fact that research shows most retail investors are the suckers in the room…)
There is a savings glut, and that justifies the housing bubble instead of a lack of good investment opportunities to build the future.
Greenspan is a briliant hack who has always been willing to lend his credibility to Republican political gambits.