Greenspan Chides Republicans For Pushing To Extend Bush Tax

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Former Fed Chairman Alan Greenspan said that the push by congressional Republicans to extend the Bush tax cuts without offsetting the costs elsewhere could end up being "disastrous" for the economy.

In an interview on NBC's "Meet the Press," Greenspan expressed his disagreement with the conservative argument that tax cuts essentially pay for themselves by generating revenue and productivity among recipients.

"They do not," said Greenspan.

"I'm very much in favor of tax cuts but not with borrowed money and the problem that we have gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money," he said. "And at the end of the day that proves disastrous. My view is I don't think we can play subtle policy here."

The comments from the former Fed chief were an elaboration of a position he outlined in an interview earlier in the week. Speaking with PBS' Judy Woodruff, Greenspan expressed his opposition to passing legislation that would hold tax rates steady (under law the tax cuts Bush passed ten years ago are going to expire, thereby bringing rates back to Clinton-era levels). President Obama has pledged to continue the tax breaks for those individuals making under $200,000 and those families earning less than $250,000.

But Republicans want the entire package kept in place. Even so, they have declined to say how they would pay for it, saying, in part, that keeping the Bush tax cuts in place will pay for itself.

In addition to throwing cold water on that theory, Greenspan also weighed in on broader economic issues and trends. The former Fed Chairman relayed some sobering economic predictions, saying he expected the nation's unemployment rate to remain at its current level, mainly because there were few tools left to change it.

"I see it [as] we just stay where we are," he said. "There is a gradual increase in employment but not enough to reduce the level of unemployment ...There is nothing out there that I can see which will alter the trend or the level of unemployment in this country."

http://www.huffingtonpost.com/2010/08/0 ... rce=chrome

It's an unfunded stimulus for the rich, plain and simple.

it's all part of grover norquist's "starving the beast" plan, by depriving the government of necessary operating revenues via upper-class tax cuts and permanent war. he is betting that his hated social programs will eventually be eliminated, when the money to pay for them is frittered away to promiscuous warmaking and corporate welfare for the military-industrial complex. it's mainly about keeping the lower classes in their rightful place in the gutter, by killing social programs at all levels of government. alan greenspan is redeeming himself, by stepping out of his upper-class shoes and committing the sin of honesty long enough to be morally responsible concerning future generations.

A better way to put it is "too little, too late". Had he been doing his job from the start, this shouldn't have gotten to this point. To assume tax breaks pay for themselves is absurd and greatly underestimates the greed of the individual.

the people who, on one side of their mouths castigate recipients of social programs as thieves, while out of the other side of their mouths chant "GREED IS GOOD!" in obscene "moral" support of the real thieves in high financial places, will have a lot of 'splainin' to do when they [to their chagrin] meet their maker, whose existence they conveniently poopooh, as they whistle past the graveyard. this is just one more example of lucky folk "straining at gnats but swallowing camels."

Unfortunately, beginning with Reagan, the Republicans learned a little secret: they can get away with run away deficits, because the voters are not focused on that. As far as the voters can tell, the predicted price doesn't seem to materialize. Politicians can get away with actually cutting taxes while only talking about cutting expenditures. Republicans have learned to talk about cutting expenditures without actually doing anything about it, because while people say they want government efficiency, when it comes to the hard choices of taking the toy out of the babies' hands, they always find out that it means their toy, too, and then they balk.

I recently read that President Obama is easing up on his position regarding the tax cut extensions for the rich, suggesting that maybe if those are just for a year or two, he'll sign off. So, my bet is that is what we'll see.

And the deficit will continue to soar.

I don't know how or when we'll be paying the piper on that, but it is likely to fall out pretty ugly when the time does come. A lot like the mortgage crisis, probably. Hm, maybe Greenspan should have compared the two, to get it to finally sink in to people.

You cut the spending first, and then you cut the taxes. We've got more than enough proof at this point that the reverse does not work.

But, seriously, how much more spending is there left to cut? Back in Reagan's day, the top marginal tax rate was 70%. Now it's in the 30's. We're already doing miles and miles better; there is only so far taxes can be cut and still leave us with a functioning government. Sure, we can all find some waste here and there. But it is impossible to be 100% efficient 100% of the time. Anyone actually accomplishing that at their jobs? Or with their household purchases?

Unfunded stimulus for the poor would be just as bad.

Unfunded stimulus of any kind without a payback when the economy picks up is a recipe for disaster.

Credit has its uses, but all loans must be repaid or the lender (meaning the taxpayers) end up screwed in the end.

ruveyn

Difference is it is the people's money not the Government's money. Raising taxes discourages investiments. We don't have a revenue problem we have a spending problem.

To the contrary, voters focus on deficits as soon as they have an effect on the economy, usually in the form of inflation or recession. The reason Reagan "got away" with continuing to run deficits was because the inflationary effect of the deficits was counteracted by the deflationary effect of Reagan's supply side stimulus, which included his tax cuts.

A quick look at supply and demand curves illustrates this:



As you can see, increasing the size of the economy by moving the demand curve to the right, as with fully monetized government spending, results in price increases or inflation. Moving the supply curve to the right, on the other hand, results in price decreases or deflation. This is why supply side techniques are compatible with larger deficits than are demand side techniques: deflation from the supply side stimulus counteracts inflation from monetizing the deficit.


It's highly misleading to imply that Obama's deficits are anything but outsized compared to those of his predecessors. Obama has already racked up more cumulative deficit in 2 years than Bush or Reagan did in 8:


http://gatewaypundit.firstthings.com/20 ... t-in-2010/

In Obama's case, the deficits haven't been fully monetized, so they've delayed the recovery rather than increasing inflation, so far. However, they're large enough that we're seeing a real effect, and the voters responded accordingly on Nov. 2.


There's plenty of it. It just happens to be in entitlement programs like medicare and medicaid, including parts of Obamacare, where cuts can be vetoed by the President. That's why there's a big game of political chicken brewing over the debt limit.

Duplicate post, sorry.

Obama's policies will totally destroy the dollar. You can't print money and expect the problem to go away. It will make the situation worse not better.

If you study the downfall of Rome, inflation was part of the problem.

And an investment problem.

ruveyn

The Government shouldn't be picking winners and losers.

Reality trumps theory. The deficit tripled during Reagan's time in office, and he wasn't foolish enough to even try to justify it. Instead, he started to offset the negative effects of some of his own tax cuts by increasing fees and utilizing other quiet ways to raise government revenue.



It is highly misleading to blame Obama for a deficit that most of us knew was coming before he was ever elected. Do you know how many of us actually considered sitting out the election and letting the other party win so they would get the blame?

Bush is the one who took office with a surplus and left with a deficit. Now that ... no one was predicting.



And that isn't going to happen. Ask your most conservative senior citizen if they will give up their medicare, and you will get a resounding, "no!" While it is actually still a wealth transference system, the formulas have changed significantly, and it is getting closer to being self funded. Your only real target here is what you call Obama-care, but I think the long run benefits to have a healthier society that doesn't end up with medical bankruptcies is worth it (although I probably would have pushed through some regulatory changes on the insurance companies instead of the whole package, given the state of the budget). And even if it wasn't ... what are we talking about, percentage of the budget wise? That isn't going to fix it. Like I said earlier, it is easy to talk about taking away toys as long as they aren't YOUR toys. But, those toys do belong to someone, and it is funny how fast someone who doesn't believe in government handouts will cry foul if you actually dare reach for theirs.

Think you don't get any toys? Think again. If you own a home, you have the mortgage interest deduction. There are many more toys like it, and many variations on the theme.

Last edited by DW_a_mom on 08 Nov 2010, 5:40 pm, edited 1 time in total.

Positively.

Government policy is killing investment.

ruveyn

Look at the graph and do the math. Obama's deficit in 2009 was $1,415 billion. Subtract the $800 billion "stimulus" bill he passed as virtually his first act in office, and you get down to $615 billion. Subtract his beefing up the auto company bailouts and other smaller measures, and that deficit gets down to $400-500 billion, which is where it was in the last year of the Bush administration.

The extra trillion - $1000 billion - can laid squarely at the feet of the Obama administration.

The debt is growing four times as fast as under Bush, and it's because of differences in policies, not because of anything that "would have happened anyway". If we knew it was going to happen anyway, it's only because we knew Obama was a tax and spend Democrat, and yes, perhaps McCain might have been a tax and spend Republican as well. However, the rank and file of the Republican party in the House were smart enough to vote against the Obama pork barrel "stimulus", and hopefully the Tea Party Republicans won't be any different.



I know several conservative senior citizens who would be happy to give up their medicare.

As for "self funding", let's talk numbers instead of generalities. The "self funded" portion of medicare - from medicare taxes, individual premiums, and state contributions - was 59.4% in 2008 and 58.6% in 2009. It's projected to drop to 58.1% in 2010, 54.7% in 2014, and 51.5% in 2017, at which point the trust fund will be 2 years from bankruptcy. See figure 6 from:

http://www.kff.org/medicare/upload/7305_03.pdf

By my definitions, 60% is far from self funded. Basically, medicare needs to be cut by 40-50%.


Using Obama's optimistic estimates, we're talking around $200 billion a year for Obamacare once it gets going, which is comparable to the medicare shortfall, even ignoring the indirect costs to the economy. More realistic estimates put it at several times as much. That's as much as the entire defense department.

And we're not going to get a "healthier society" out of it, either. You don't make people healthier by throwing money at the medical establishment so they can invent more expensive pills to prescribe.

The only way to make people healthier is to put incentives in place to help them keep from getting sick in the first place. That's the reason for the Republican proposals to weaken or break the ties between health insurance and employers. As long as the employers pay for health insurance, health care is going to be geared towards a short term goal of putting off the most expensive costs until after the employee is likely to have moved on to a different employer. Make health insurance portable so it stays with the individual instead of with the employer, and suddenly the insurers and the doctors have an incentive to keep individuals healthy in the long term instead of just pushing problems off. That's how to help people be healthier, and it doesn't any government subsidies.


I have a substantial mortgage interest deduction. However, you are mistaken; I've been in favor of eliminating the mortgage interest deduction ever since Reagan first proposed that in his tax simplification bill. It's unfortunate that provision was stripped from the bill; if it had been passed, the recent housing bubble would likely never have happened and we wouldn't have had this recession.

Unlike Obama, I don't view the world as a zero sum game, where the only way to build yourself up is to tear other people down. I'm more than happy to make my share of the sacrifices needed to help everyone by restoring confidence in the economy.