Editore"s Note
Tilting at Windmills

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February 11, 2003
By: Kevin Drum

ALAN GREENSPAN DISAPPOINTS THE REPUBLICANS....Paul Krugman wondered aloud last week if Alan Greenspan would keep a bit of dignity when he testified before congress today, or whether he would simply confirm that he's nothing but a shill for the Republican party. Apparently, he decided he's had enough and rubbished the Bushies' claim that economic growth would wipe out the deficit all on its own:

Greenspan dealt a blow to Republican hopes by apparently challenging this assessment, saying, "Faster economic growth, doubtless, would make deficits far easier to contain. But faster economic growth alone is not likely to be the full solution to currently projected long-term deficits."

....Greenspan was unequivocal in his support of Bush's plan to eliminate dividend taxes, saying it was "a sensible long-term program." However, he also said such a plan should be "revenue neutral," meaning Congress should find a way to make up the revenue lost by eliminating the tax.

Greenspan also disagreed with the notion, offered lately by some Republicans and economists in support of the President's tax plan, that deficits can rise without having an impact on long-term interest rates.

"There's no question that when deficits go up, contrary to what some have said, it does affect long-term interest rates, it does affect the economy," he said.

Let's summarize his testimony in normal English, shall we?

  • The war with Iraq is bad for the economy.

  • The proposed deficit is too large, and it's bad for the economy too.

  • A big part of the deficit is caused by Republican tax cut proposals. Economic growth alone won't get rid of the deficit, no matter how often they say it will.

  • Thus, taxes should not be cut right now. Eliminating the dividend tax is "a sensible long term program," but only if other taxes are raised to make up for it.

In other words, virtually every single thing the Republicans are doing is bad for the economy. Not bad! The old guy still has a little bit of spine left in him.

Unfortunately, there was this too: "He also said he was not overly concerned with the risk of a decline in the price of housing...." So even after the stock market bubble of the 90s, Greenspan still doesn't seem to be concerned about asset inflation, this time in the form of a housing bubble. Will he never learn?

Kevin Drum 10:39 AM Permalink | Trackbacks

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