Greenspan: Economy OK But Watch Deficits
The U.S. economy is growing at a “reasonably good pace,” Federal Reserve Chairman Alan Greenspan said on Wednesday, but he warned dangerous budget deficits must be fixed, preferably through spending cuts.
“You cannot continuously introduce legislation which tends to expand budget deficits because down the road the impact of an ever-rising deficit, especially as a percent of the GDP, creates some significant weakness in the structure of the economy,” Greenspan told the House of Representatives Budget Committee.
“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,” he said.
I agree with Greenspan that raising taxes isn’t the way to fix our deficit situation. Raising taxes slows economic growth and spending. The government needs to start by fixing Social Security and Medicare.
All in all this means Greenspan backed the President on his idea to restructure Social Security – - It also means that the once popular with the Democrats financial wiz fell short of their expections during his report.
So how did the Dems really take it?
Asked Thursday his reaction to Federal Reserve Chairman Alan Greenspan’s insistence this week that Social Security must be transformed, preferably along lines urged by Bush, Reid replied:
“I’m not a big Greenspan fan. … I voted against him two times. I think he’s one of the biggest political hacks we have in Washington,” Reid said on CNN’s “Judy Woodruff’s Inside Politics.”
Reid complained that Greenspan had decried budget deficits when Bill Clinton was president but he doesn’t criticize Bush for turning a federal budget surplus he inherited from Clinton into trillions of new debt.
It will be interesting to see if Reid can keep all his people together.
It’s no big shock the democrats are standing strong against changes to Social Security – - However, if GW and the administration can come up with a plan that will suit both parties then Reid’s position is going to become more and more unstable.
So what happened when:
Greenspan warned of economic stagnation (hat tip to peejz)
Congress appeared to be in no rush. Greenspan appeared on Capitol Hill the day after the Senate’s top Republican suggested that Bush’s plan may have to wait until next year as national polls indicate that support for it is slipping.
Greenspan, in some of his most forceful language on the subject, said Congress should consider private accounts because the Social Security system is outdated. The nation has promised retirees more Social Security and Medicare benefits than it can deliver, he said.
So the politicians wait to put it off another year or so – - Figures.
“top Republican suggested that Bush’s plan may have to wait until next year as national polls indicate that support for it is slipping”- This is what infuriated me the most. They will put it off because of polls? Greenspan layed it out. This isn’t something that will go away. The time to act is now. I remind myself of all of those that claim they don’t want to leave their children and grandchildren riddled with debt yet they have no problem leaving them with 70% of the promised SS benefits. Makes no sense.
STORIES
•Greenspan Backs Personal Accounts, But Slowly•Senator: Social Security Plan Has Small Window for Approval
WASHINGTON ” Republicans struggled to sort out Social Security (search) disputes among themselves Thursday as Democrats bought radio ads to attack President Bush and GOP allies in Congress along the next leg of his road trip pitching his overhaul.
At the Capitol, Senate Majority Leader Bill Frist (search) said Congress must confront Social Security’s problems this year, dialing back his comments of two days earlier that action might have to wait ” a turnabout Democrats wasted little time in mocking.
“We need to do it this year. Not the next year,” Frist said Thursday on the Senate floor. “We are working toward this goal.”
On Tuesday, Frist noted Democratic opposition and suggested action might have to wait. “I want to be realistic,” Frist said then.
Bush wants action this year, though no piece of legislation has emerged as a leading contender and Bush has not laid out a comprehensive plan of his own. While supporters say the issue needs bipartisan support to pass, congressional Democrats are nearly unanimous in their opposition.
Republicans, too, have expressed skepticism about the Bush plan, and polls have found public support falling.
Bush proposes allowing younger workers to divert a portion of their payroll taxes into personal accounts that could be invested in stocks and bonds. In return, they would forgo some of the traditional Social Security benefit.