- posted 9 years ago
I am struck by Alan Greenspan's remarks in today's NY Times. I am not a disciple of his. Yet I would not have predicted him to be so outspoken on the role health care spending, for one, is taking in this Depression. His mention of how we do not have a WWII to bail us out here is also noteworthy to me.
While Mr. Greenspan?s reputation has been tarnished ? given the Fed?s failures to pop the real estate bubble and to rein in subprime mortgage lending ? his perspective, born of decades of data-crunching, has made him a figure revered by many in the markets. His opinion still carries considerable weight and his views on the tax cuts will reverberate in the debate next month in Congress.
?Unlike in World War II, when we knew that military spending and deficits would fall sharply, our current understanding of the future is extremely limited,? Mr. Greenspan said. ?There?s an especially high level of uncertainty in forecasting Medicare.?
He said the country?s fiscal problems could not be solved by higher taxes alone. ?We are going to have to confront a major surge in medical entitlement spending. Irrespective of what you say should be done on the tax side, you still have to cut some benefits on the expenditure side.?
Mr. Greenspan, who is known for his political skills and his connections in both parties, bemoaned the political gridlock in the capital.
?We have known that the tax cuts were going to expire at the end of 2010 for nearly a decade but nobody did anything to address the issue,? he said.
Asked whether higher taxes in 2011 could choke off the nascent recovery, Mr. Greenspan replied: ?It is risky, but the choice of not doing it is far riskier. It is the difference between bad and worse, but in neither case do I think the evidence suggests that it would be the tipping point for the economy.?