Posted on 03/02/2005 2:49:59 PM PST by neverdem
WASHINGTON, March 2 - Alan Greenspan, the Federal Reserve chairman, warned today that federal budget deficits are "unsustainable" and urged Congress to consider both spending cuts and tax increases as possible solutions.
In his gloomiest assessment yet about the government's budget outlook, Mr. Greenspan warned that annual shortfalls were "unlikely to improve substantially in the coming years unless major deficit-reducing actions are taken."
The Fed chairman emphasized that his strong preference was to reduce the deficit through spending cuts rather than tax increases. But he insisted that Congress needed to offset the costs of making Mr. Bush's tax cuts permanent.
"Addressing the government's own imbalances will require scrutiny of both spending and taxes," Mr. Greenspan told members of the House Budget Committee.
Though the Fed chairman has made similar pleas in the past, he spoke more urgently today and disagreed more adamantly with Republican lawmakers and President Bush who have steadfastly refused to put restrictions on new tax cuts.
"When you begin to do the arithmetic of what the rising debt level implied by the deficits tells you, and you add interest costs to that ever-rising debt, at ever-higher interest rates, the system becomes fiscally destabilizing," Mr. Greenspan said.
"Unless we do something to ameliorate it in a very significant manner, we will be in a state of stagnation."
Mr. Greenspan's comments came as House and Senate leaders are trying to craft a budget resolution, a blueprint for spending and tax legislation this year, that they hope to unveil as early as next week.
One major issue in those discussions is whether to include provisions that would make it easier to extend some of Mr. Bush's tax cuts, one of the White House's top priorities.
None of Mr. Bush's big tax cuts are scheduled to expire this year, but the 2003 tax cuts on stock dividends and capital gains are set to expire in 2008 and the other big tax cuts are all set to expire by the end of 2011.
Making all of those tax cuts permanent, as Mr. Bush wants, would add about $1.8 trillion to the federal debt over the next 10 years, according to the nonpartisan Congressional Budget Office.
Representative Jim Nussle, Republican of Iowa and chairman of the House Budget Committee, immediately took issue with Mr. Greenspan on the need for restrictions on future tax cuts.
"I would hate to see an arbitrary rule," Mr. Nussle said, noting that Democrats had bitterly opposed Mr. Bush's proposal to reduce taxes on dividends and capital gains - a tax cut that Mr. Greenspan endorsed in 2003 and said today should be made permanent.
But Mr. Greenspan stood firm, contending that the "overriding" principle was to reduce the deficit and that lawmakers had to be ready to compromise.
"It's the principle that I think is involved here, namely that you cannot continuously introduce legislation which tends to expand the budget deficit," the Fed chairman said, adding that "compromise is essential" and that this is an issue of "political economy."
As he has in the past, the Fed chairman focused most of his attention on the long-term fiscal problems that are expected to emerge in Social Security after the nation's baby-boom generation begins to reach retirement age in 2008.
Mr. Greenspan strongly supported President Bush's plan to let people divert some of their Social Security taxes into private accounts, but he called for much bigger cuts than Mr. Bush has suggested in the government's full array of old-age entitlement programs, focusing on Medicare as well as Social Security.
Indeed it will, lets lower both.
Making tax cuts permanent doesn't cost one penny. The government will be stealing less of our money, and in return will receive higher revenues. After 3 decades and creating 3 recessions, poor old Al still can't tell the truth.
Sounds like Greenspan is about to pull the plug on the economy. And let the gubberment take the fall for it. Always during a republican Administration.
"The Fed chairman emphasized that his strong preference was to reduce the deficit through spending cuts rather than tax increases."
I caught part of his testimony -- this article grossly misrepresents it.
Exact quote from his testimony:
"Addressing the government's own imbalances will require scrutiny of both spending and taxes. However, tax increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base. The exact magnitude of such risks is very difficult to estimate, but, in my judgment, they are sufficiently worrisome to warrant aiming, if at all possible, to close the fiscal gap primarily, if not wholly, from the outlay side. In the end, I suspect that, unless we attain unprecedented increases in productivity, we will have to make significant structural adjustments in the nation's major retirement and health programs."
He is advocating SPENDING cuts, not tax increases. MSM is lying to us by slant and omission and taking statements out of context.
Here is the full text of his testimony -- although it doesn't include the Q&A session.
Full text of Greenspan's testimony
Remarks given before House budget committee
http://www.msnbc.msn.com/id/7066276/
Neither the government or Greenspan took the blame in 2002. It was evil corporations and greedy investors. They'll always find someone else to blame.
Greenspan has a tough job. He has to testify before the very crooks who are taking our money, yet they control his fate.
In other words, cut some dang programs, idiots!
And here is an article, which is more representative of what G. actually said -- from the UK Times.
Greenspan puts pressure on US to cut spending
http://business.timesonline.co.uk/article/0,,8209-1508500,00.html
ALAN GREENSPAN stepped up the pressure on the Bush Administration and the US Congress yesterday to act urgently to rein in America’s burgeoning government borrowing.
In one of his sternest warnings on the issue, the Federal Reserve Chairman said that a failure to act decisively could have “severe consequences”.
He urged an emphasis on spending cuts rather than tax increases to curb the $400 billion (£210 billion) deficit, sounding a warning that higher taxes could damage US economic performance.
I was sufficiently annoyed at the NYT's misrepresentation, that I posted the UK Times article, as its own thread:
Greenspan puts pressure on US to cut spending
http://www.freerepublic.com/focus/f-news/1354619/posts
We wanted Republicans in charge and this is what we got...Whoever said 'there's not a dimes worth of difference', was correct to the penny.
Hey Al..remember this???... http://www.freerepublic.com/forum/a3b49596420e0.htm
Hurray for Greenspan!! He's identified the sypmtom - excessive spending. The disease is an excess of democracy. (the same was noted by a delegate to the 1787 convention) Asking for spending cuts ignores the nature of the beast he is dealing with. Asking Congress to stop spending is like asking Clinton to stop Tomcatting. He should be asking: why can't congress say "no"? The answer is the 17th Amendment. Popular election of Senators. Popularly elected senators can't say no to a public that has discovered that it can vote itself largess from the treasury.
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