Pete Davis at Capital Games and Gains gives his take on Alan Greenspan, of all people, now calling for the end of the Bush tax cuts.
Pardon my incredulity! Alan Greenspan just taped an interview with Judy Woodruff for broadcast tomorrow and over the weekend. This Bloomberg News story quotes him saying, "They should follow the law and let them [the Bush tax cuts] lapse." He believes it is more important at this point to cut burgeoning deficits than to funnel more money to taxpayers. In a telephone interview after the taping, Greenspan acknowledged that this "probably will" slow growth.
Recall also, in 2001, Fed Chair Alan Greenspan's crucial testimony in support of the Bush tax cuts. That gave Congress the high sign that the Fed wouldn't choke off that much fiscal stimulus.
This is another example of the adage that if you live long enough you'll see everything, including Alan Greenspan getting religion on the federal deficit.
Recall that in 2001 Greenspan warned that with the Government swimming in money (a then ballooning budget surplus) the Federal Debt would soon be paid off and that we wouldn't know what to do with the all the excess capital! Better to get into the private hands of the wealthy as soon as possible, lest it get wasted.
The most recent projections, granted their tentativeness, nonetheless make clear that the highly desirable goal of paying off the federal debt is in reach before the end of the decade. This is in marked contrast to the perspective of a year ago when the elimination of the debt did not appear likely until the next decade.
But continuing to run surpluses beyond the point at which we reach zero or near-zero federal debt brings to center stage the critical longer-term fiscal policy issue of whether the federal government should accumulate large quantities of private (more technically nonfederal) assets. At zero debt, the continuing unified budget surpluses currently projected imply a major accumulation of private assets by the federal government. This development should factor materially into the policies you and the Administration choose to pursue.
Recall also that when Bill Clinton office the Federal Debt was approximately $6 trillion, having quadrupled under Ronald Reagan and George H.W. Bush, it was now actually reversing.
Jump ahead to the end of George W. Bush's presidency and the debt, aided with the Bush tax cuts, had risen to over $10 trillion. So much for the end of the National Debt. Here's what happened in graphical form.