Greenspan’s hackery

April 21, 2005

Senate Minority Leader Harry Reid (D-Nev.) may have been a little intemperate when he called Federal Reserve Chairman Alan Greenspan “one of the biggest political hacks we have here in Washington” last month, but then again, if the shoe fits…

Bloated budget deficits pose a danger to the nation’s long-term economic health, Federal Reserve Chairman Alan Greenspan warned anew Thursday. He issued a fresh call to policy-makers to move swiftly to get the government’s fiscal house in order. […]

Greenspan said the persistence of swollen budget deficits in the years ahead “would cause the economy to stagnate or worse” unless the situation is reversed. “The federal budget is on an unsustainable path, in which large deficits result in rising interest rates and ever-growing interest payments that augment deficits in future years,” Greenspan said.

Yeah, now he tells us. Those would be the same record-high deficits caused by Bush tax cuts that Greenspan endorsed in 2001 — and supports making permanent into the future.

Indeed, let’s not forget how tragically misguided Greenspan has been on the subject. In 2001, the Federal Reserve chairman helped boost Bush’s tax-cut package by saying it would help balance the budget.

“In today’s context, where tax reduction appears required in any event over the next several years to assist in forestalling the accumulation of private assets, starting that process sooner rather than later likely would help smooth the transition to longer-term fiscal balance.”

Later, after his mistake was plainly obvious, he tried to spin his way out of it.

When Fed chief Alan Greenspan acknowledged last week that he’d been wrong to expect tax cuts to produce budget surpluses, he cast his mistake as part of a collective, unavoidable error. “It turns out that we were all wrong, ” he told the Senate Special Committee on Aging. It was not just the belief of the Fed and the tax-hating Republicans, but “an almost universal expectation amongst experts” that cutting taxes for the wealthy would generate more government revenue.

Of course, as Hillary Clinton reminded him, “Just for the record, we were not all wrong, but many people were wrong.”

If Greenspan doesn’t want to be called a “hack,” he’ll have to stop acting like one.

A tacit endorsement of Clinton’s economic policies, and a shot at The Chairman? From Bloomberg?

“The Fed chairman urged lawmakers to focus on reducing spending and advocated a return to pay-as-you-go budget rules that required any new spending or tax cuts to be offset by spending cuts or tax increases elsewhere in the budget.

Those rules, and the booming economy of the 1990s that boosted tax revenue, helped balance the federal budget and bring it into surplus. The rules lapsed in 2002.

…

President George W. Bush’s 2001 tax cuts, passed in part because of Greenspan’s support, and a recession reduced government revenue. Wars in Afghanistan and Iraq, and Congress’s decision not to renew caps on spending have since driven up expenditures.” Emphasis supplied.

Greenspan Says Budget Deficits May Cause Economy to Stagnate

  • As a reader that is also a non-traditional college student it has been enlightening to take a macro economics class this Spring. Yesterday I sat through a lecture on fiscal policy, the instructor parroted the same supply side bs that Greenspan said in 2001. You all know how it goes, if the folks at the top of the financial ladder don’t have to ante up tax money then they’ll suddenly lavish the rest of us with wheelbarrows full of cash and we’ll all live happily ever after in capitalistic nirvana.

  • Hey, Mark. Some call “capitalistic nirvana” trickle-down economics. I call it BULLSHIT.

  • slip kid,
    Karl Marx called it a false consciousness. Whatever term, euphemism, spin or whatever, it all ends up the same, the people at the bottom get the crumbs, if we’re lucky.

  • Hey Mark and slip kid, George H.W. Bush (a/k/a Bush 41) during the Republican primary season in 1980 took Reagan’s “supply-side economics” — which Dems labeled “trickle down economics” — and properly labeled it “voo-doo economics”. Of course, when Reagan picked George H.W. as his V-P running mate, Poppie Bush suddenly found “supply side” to be political genius. Of course, Bush 41 was such a genius about taxes and the economy that he got strangled by his “read my lips, no new taxes” pledge that he had to eat later with tax increases, but also was strangled by his disconnect with the little guys (the fool didn’t even know what bar code readers were in grocery stores!) — and that’s when we got the Big Dog in 1992’s election!!

  • (I’ve always referred to Supply-side economics as ‘Tinkle Down’)

    I don’t have access to past news, but it strikes me that Greenspan said essentially the opposite about big deficits 8-10 months ago, that is, the large deficits will not hurt the economy in the long run.

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