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  • Greenspan: Deficits are OK

    Greenspan has changed his mind on deficits and is no longer an champion of the istanteous balanced budget. (Now where have you heard this before?)

    March 16, 2004
    Greenspan Shifts View on Deficits
    By EDMUND L. ANDREWS


    ASHINGTON, March 15 — Consumer debt is hitting record levels. The federal budget deficit is yawning ever larger. The trade gap? Don't even ask.

    Many mainstream economists are worried about these trends, but Alan Greenspan, arguably the most powerful and influential economist in the land, is not as concerned.

    In speeches and testimony, Mr. Greenspan, chairman of the Federal Reserve Board, is piecing together a theory about debt that departs from traditional views and even from fears he has himself expressed in the past.

    In the 1990's, Mr. Greenspan implored President Bill Clinton to lower the budget deficit and tacitly condoned tax increases in doing so. Today, with the deficit heading toward a record of $500 billion, he warns more emphatically about the risks of raising taxes than about shortfalls over the next few years.

    On Monday, the nonpartisan Congressional Budget Office published new calculations showing that the budget deficit now stems almost entirely from tax cuts and spending increases rather than from lingering effects of the economic slowdown.

    Mr. Greenspan's thesis, which is not accepted by all traditional economists, is that increases in personal wealth and the growing sophistication of financial markets have allowed Americans — individually and as a nation — to borrow much more today than might have seemed manageable 20 years ago.

    This view is good news for President Bush's re-election prospects. It increases the likelihood that the Federal Reserve will keep short-term interest rates low. And it could defuse Democratic criticism that the White House has added greatly to the nation's record indebtedness.

    Adjusted for inflation, the average family's debt, including a mortgage, has climbed from $54,000 in 1990 to $79,000 last year. Mortgage foreclosures, credit card delinquencies and personal bankruptcies are all at near record levels.

    Mr. Greenspan's view is that household balance sheets are "in good shape," and perhaps stronger than ever, because the value of people's homes and stock portfolios have risen faster than their debts.

    The Fed chairman is equally sanguine about the nation's overall borrowing from foreigners, which has soared to more than $500 billion a year and has contributed to a sharp drop in the value of the dollar. And he has also made it clear he will not try to torpedo the president's tax-cutting agenda, which could add another $2 trillion to federal borrowing over the next decade.

    "History suggests that the odds are favorable that current imbalances will be defused with little disruption," he declared in a speech two weeks ago.

    http://tools.wikimedia.de/~gmaxwell/jorbis/JOrbisPlayer.php?path=John+Williams+The+Imperial+M arch+from+The+Empire+Strikes+Back.ogg&wiki=en

  • #2
    Greenspan is a partisan hack

    CLinton runs deficits = bash Clinton

    Bush runs deficits (much worse BTW) = "deficits okay"



    Greenspan should be removed.
    To us, it is the BEAST.

    Comment


    • #3
      Sava, to some extent I agree with you about Greenspan. I think he is singly responsible for the economic collapse we experienced in 2000-1. He was the one arguing all that time (the 1990s) for a balanced-budget and at the same time for tight money. He got his wish and the economy crashed. Anyone could have predicted it. The fact that Greenspan did not says something about Greenspan's understanding of economics.

      He has finally come around to an understanding that budget deficits are not necessarily bad even if he hasn't gone so far yet to agree that they are good thing. As I have said before in other threads, the only person that seems to understand that that deficits are good is Dick Cheney, who cites the long economic expansion of the Reagan years as being caused by the large sustained deficits during that era.
      http://tools.wikimedia.de/~gmaxwell/jorbis/JOrbisPlayer.php?path=John+Williams+The+Imperial+M arch+from+The+Empire+Strikes+Back.ogg&wiki=en

      Comment


      • #4
        The current deficits are not good, however. We have a huge expenditure approaching, during a period when there are going to be fewer productive people. We should be paying down the deficit as much as we can right now, before the Boomers retire. Soon we won't have any option but to cut benefits instead (which is the Republican plan).
        Christianity: The belief that a cosmic Jewish Zombie who was his own father can make you live forever if you symbolically eat his flesh and telepathically tell him you accept him as your master, so he can remove an evil force from your soul that is present in humanity because a rib-woman was convinced by a talking snake to eat from a magical tree...

        Comment


        • #5
          Originally posted by chegitz guevara
          The current deficits are not good, however. We have a huge expenditure approaching, during a period when there are going to be fewer productive people. We should be paying down the deficit as much as we can right now, before the Boomers retire. Soon we won't have any option but to cut benefits instead (which is the Republican plan).
          Nader says ignore Greenspan on this one too. He says that SS is in good shape.
          http://tools.wikimedia.de/~gmaxwell/jorbis/JOrbisPlayer.php?path=John+Williams+The+Imperial+M arch+from+The+Empire+Strikes+Back.ogg&wiki=en

          Comment


          • #6
            As I have said before in other threads, the only person that seems to understand that that deficits are good is Dick Cheney, who cites the long economic expansion of the Reagan years as being caused by the large sustained deficits during that era.


            deficits aren't "good"... it's just that the deficit-driven inflation scare, that Greenspan scolded Clinton on, is a myth.

            link: http://www.epinet.org/content.cfm/we...er_conf_speech

            This is from the Economic Policy Institude (pretty much the biggest collection of economic geniuses).

            The Reagan years were terrible, Ned. The 12 years of Repuke presidency added $4 TRILLION in debt. That's a ticking time bomb... and now the next Bush has added almost $2 TRILLION in a quarter of the time.

            Short-term deficit spending to spur the economy (that's SPENDING, not tax cuts) is what is good. This Republican "destroy the federal government" brand of economics is going to cause the downfall of our federal government.
            To us, it is the BEAST.

            Comment


            • #7
              deficits are good
              Until you have to pay them back.
              meet the new boss, same as the old boss

              Comment


              • #8
                Sava, good article. It seems to agree with me that balanced budgets and surpluses are not necessarily good things and that to elevate them to the status of national policy was to make the Democrats into Eisenhower Republicans.

                Indeed, an overwhelming focus on balanced budgets is the earmark of Eisenhowerism and is a false doctrine. Eisenhower brought us stagnation and recession. Kennedy and Reagan, who cut taxes, brought us proserity. Clinton "benefitted" from the large deficits inherented from Reagan-Bush. But he then tried to balance the budget like Eisenhower - with the exact same results -- a major recession.
                http://tools.wikimedia.de/~gmaxwell/jorbis/JOrbisPlayer.php?path=John+Williams+The+Imperial+M arch+from+The+Empire+Strikes+Back.ogg&wiki=en

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                • #9
                  Kennedy's tax cuts which brought prosperity WERE COMPLETELY DIFFERENT from the protectionist GIVEAWAYS to the rich and WEALTH REDISTRIBUTION that Reagan committed.

                  Balanced budgets WILL NOT bring a major recession... You are waayyyyyy off track Ned.
                  To us, it is the BEAST.

                  Comment


                  • #10
                    Clinton "benefitted" from the large deficits inherented from Reagan-Bush. But he then tried to balance the budget like Eisenhower - with the exact same results -- a major recession.
                    God forbid that Clinton EVER have actually been right for once!
                    meet the new boss, same as the old boss

                    Comment


                    • #11
                      Deficits aren't monolithic things that are "paid back" per se...

                      They are countless T-Bills, T-Notes and T-Bonds that come to fruition, with intially set interest.

                      The fact that there are so many in the pipe at any one time means that there is liquidity in the system. Where the government is losing money, it just prints the money it needs, raising the money multiplier, and slightly raising inflation.

                      The problem comes when the incentive to buy Treasury issued credit dries... which there is evidence of, as we speak.

                      The less buyers, the more pressure to make them more attractive... which requires raising their interest yield, which will have later inflationary effects.

                      The system can, at a point generate diminishing returns, with each inflationary trigger knocking on more need for more capital by the government, at a later date. A viscious cycle. This ultimately devalues each dollar in the system.

                      Therefore the problem with deficits, is that they are an inflationary influence, given certain situations.

                      Comment


                      • #12
                        Originally posted by Sava
                        Kennedy's tax cuts which brought prosperity WERE COMPLETELY DIFFERENT from the protectionist GIVEAWAYS to the rich and WEALTH REDISTRIBUTION that Reagan committed.

                        Balanced budgets WILL NOT bring a major recession... You are waayyyyyy off track Ned.
                        What? You got to be kidding.
                        http://tools.wikimedia.de/~gmaxwell/jorbis/JOrbisPlayer.php?path=John+Williams+The+Imperial+M arch+from+The+Empire+Strikes+Back.ogg&wiki=en

                        Comment


                        • #13
                          Originally posted by Ned


                          What? You got to be kidding.
                          Kidding about what?

                          The 80's were not a prosperous time for America (maybe for the top 1% it was).

                          Wage stagnation... the poor and working class wages grew less than the rate of inflation (inflation due to Reagan's deficits).

                          Concentration of welath... because of Reagan's (and Greenspan's) push towards REGRESSIVE taxation, Wealth was REDISTRIBUTED in a "reverse Robin hood" manner. The poor were taxed and the rich received GIVEAWAY in tax cuts and subsidies.

                          Massive unemployment... just like Bush's America... Reagan's America was full of unemployment... the rates (which are already high) are artificially lower because discouraged workers were not counted.

                          Ned... How can you not come to the same conclusions as I do when confronted with these FACTS!?

                          Believe or not... I think you are smart and capable enough to think logically using reason and empirical evidence.
                          To us, it is the BEAST.

                          Comment


                          • #14
                            Sava, the Kennedy tax cuts cut the top rates far more than Bush's tax cuts. In terms of total reductions in taxes, Kennedy's were the largest of the three (Kennedy, Reagan, Bush) in post WWII, IIRC.

                            When Johnson got into power, he again brought back the "balanced budget" thinking and immediately begain trying to raise taxes to balance the bduget. He was successful and his tax increase caused a recession.
                            Last edited by Ned; March 16, 2004, 14:15.
                            http://tools.wikimedia.de/~gmaxwell/jorbis/JOrbisPlayer.php?path=John+Williams+The+Imperial+M arch+from+The+Empire+Strikes+Back.ogg&wiki=en

                            Comment


                            • #15
                              Originally posted by Ned
                              Sava, the Kennedy tax cuts cut the top rates far more than Bush's tax cuts. In terms of total reductions in taxes, Kennedy's were the largest of the three (Kennedy, Reagan, Bush) in post WWII, IIRC.

                              When Johnson got into power, he again brought back the "balanced budget" think and immediately begain trying to raise taxes to balance the bduget. He was successful and his tax increase caused a recession.
                              Kennedy cut rates from 90 something to 60 something... OF COURSE THE CUTS WERE LARGER!!

                              but they were the right thing to do because the economic conditions called for them... NOTHING suggests... NOT ONE PIECE OF EVIDENCE... suggests Bush's or Reagan's tax cuts were called for. AND THEY HAVEN'T DONE DIDLEY****!

                              here Ned... from the Economic Policy Institute: http://www.epinet.org/content.cfm/issuebriefs_ib157

                              it explains what I am talking about...
                              To us, it is the BEAST.

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