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Upstaging the Maestro (LA Times registration required)
I am amazed at how much ink and paper, and talking head breath, is STILL wasted on the assumption that the Fed, the president, Sadaam Hussein, the Easter Bunny, or any individual can REALLY control the economy. But this article illustrates the fake clothes slipping off the naked emperor, so here goes.
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"He let himself get caught in a series of rhetorical traps. For instance, he warned against the danger of deficits expected when the baby boomers begin retiring at the end of the decade.
But at the same time, he said that the deficits the administration expects to run up between now and then are entirely manageable.
"He acted as if the two were completely disconnected," complained Rep. Barney Frank (D-Mass.), a member of the House Financial Services Committee, one of two panels before which the Fed chairman appeared.
"That's like the guy who's jumping off the Empire State Building and passing the fourth floor saying, 'I'm not doing too bad,' '' quipped Frank.
...
"He told lawmakers two years ago that Washington was running such large surpluses that it was paying off the public debt too quickly, and should cut taxes to slow the pace.
(boy, is THAT a contrarian sign or what!!??)
"I remember that hearing as though it were yesterday," Sen. Paul S. Sarbanes (D-Md.) mused this week. "The chairman said that a tax cut was needed 'to smooth the glide path so that the government debt would not be paid off too quickly.' '' As things turned out, surpluses turned to deficits and fear of a debt payoff vanished.
...
"He is pretty much at the end of his policy rope."
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Upstaging Maestro Greenspan
the old windbag should have been put out to pasture long ago
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#1
SusanJBear 
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Posted 14 February 2003 - 11:48 AM
MultiQuote
#2
EasyAl
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Posted 14 February 2003 - 03:45 PM
Greenspan also lied to Congress by saying that spending on computer equipment "rose 25 percent in real terms" in 2002, a gain that "more than reversed the previous year's decline." In reality, spending on computers, measured in actual dollars, grew only 0.3 percent in 2002, and was 20 percent below the record set in 2000
Uncle Al should be charged for giving false report to Congress
Uncle Al should be charged for giving false report to Congress
#4
EasyAl
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Posted 14 February 2003 - 08:36 PM
Here a part of Paul Kasriel's column on Greenspan's Congressional testimony which is titled Freedom's Just Another Word For Nothing Left To Lose - Fed Chairman Greenspan's February 11th Senate Testimony
Quote
As I watched Fed Chairman Greenspan testify before the Senate Banking Committee on Tuesday, February 11th, I sensed a second to last "hurrah" for him. That is, I sensed that July might mark his last appearance before this committee as Fed chairman. Why? Because he dissed the Bush administration on the topic of fiscal policy. We have come to learn that disloyalty is a career-ender in the Bush administration. It appears as though Greenspan either does not want to be re-appointed as Fed chairman next year or has learned that he will not be re-appointed.
The Fed chairman's primary responsibility is to manage the country's supply of money and credit. Fiscal policy is not part of his portfolio. Now, of course, the Fed chairman can not dictate the questions senators or congressmen might ask him after his prepared testimony. If they choose to ask him about fiscal policy, so be it. But why would a Fed chairman devote 54% of his prepared testimony to fiscal policy issues in a semiannual monetary policy report to Congress? I think Chairman Greenspan is now trying to restore his reputation as a fiscal hawk after having had that reputation besmirched in his tacit endorsement of the Bush administration's 2001 tax cut.
How exactly did Chairman Greenspan dis the Bush administration's proposed fiscal policy? He introduced the concept of accrual accounting in evaluating federal budgetary policy. Accrual accounting is just a fancy way of saying that we might want to take into consideration the future Social Security and Medicare outlays when the baby boomers start retiring en masse. On this point, Chairman Greenspan said:
"Accrual-based accounts would lay out more clearly the true costs and benefits of changes to various taxes and outlay programs and facilitate the development of a broad budget strategy. In doing so, these accounts should help shift the national dialogue and consensus toward a more realistic view of the limits of our national resources as we approach the next decade and focus attention on the necessity to make difficult choices from among programs that, on a stand-alone basis, appear very attractive." [emphasis added]
"Accrual-based revenue and outlay projections, tied to a credible set of economic assumptions, tax rates, and programmatic spend-out rates, can provide important evidence on the long-term sustainability of the overall budget and economic regimes under alternative scenarios."6
6"In general, fiscal systems are presumed stable if the ratio of debt in the hands of the public to nominal GDP (a proxy for the revenue base) is itself stable. A rapidly rising ratio of debt to GDP, for example, implies an ever-increasing and possibly accelerating ratio of interest payments to the revenue base."
What Chairman Greenspan is suggesting is that tax cuts today coupled with higher Social Security and Medicare outlays in the next decade could lead to a "rapidly rising ratio of debt to GDP next decade. When looked at on an accrual basis, current tax cut proposals might not cause an explosion in the debt-to-GDP ratio in the next five years, but to an exploding ratio in the next ten years. This appears to be a shot across the Bush Administration's bow with regard to its proposed "jobs and growth" policy.
Another dis to the Bush administration is Greenspan's following statement: "[E]conomic growth cannot be safely counted upon to eliminate deficits and the difficult choices that will be required to restore fiscal discipline." The Bush administration has argued that to a greater or lesser extent that we can "grow our way out of budget deficits."
Still another dis came in the Q &A when Chairman Greenspan stated that higher budget deficits put upward pressure on interest rates. On this issue, the Bush administration has adopted the cigarette industry's defense - there is no conclusive evidence to prove it.
I want to close with two thoughts. Firstly, I do not necessarily endorse Chairman Greenspan's implicit criticisms of the Bush administration's jobs and growth fiscal proposals. Rather, I am just arguing that Chairman Greenspan's implied criticisms would seem inconsistent with behavior conducive to re-appointment. Secondly, it is regrettable that Chairman Greenspan did not bring up the concept of accrual accounting in 2001 when he tacitly endorsed the Bush administration's tax cut proposal of that time. Instead of endorsing a tax cut as a use of the big federal budget surplus existing in 2001, Chairman Greenspan might have recommended that the surplus be used to transition Social Security into a privatized and true retirement insurance system. This was a missed opportunity. It is not clear when another opportunity for this will arise again.
The Fed chairman's primary responsibility is to manage the country's supply of money and credit. Fiscal policy is not part of his portfolio. Now, of course, the Fed chairman can not dictate the questions senators or congressmen might ask him after his prepared testimony. If they choose to ask him about fiscal policy, so be it. But why would a Fed chairman devote 54% of his prepared testimony to fiscal policy issues in a semiannual monetary policy report to Congress? I think Chairman Greenspan is now trying to restore his reputation as a fiscal hawk after having had that reputation besmirched in his tacit endorsement of the Bush administration's 2001 tax cut.
How exactly did Chairman Greenspan dis the Bush administration's proposed fiscal policy? He introduced the concept of accrual accounting in evaluating federal budgetary policy. Accrual accounting is just a fancy way of saying that we might want to take into consideration the future Social Security and Medicare outlays when the baby boomers start retiring en masse. On this point, Chairman Greenspan said:
"Accrual-based accounts would lay out more clearly the true costs and benefits of changes to various taxes and outlay programs and facilitate the development of a broad budget strategy. In doing so, these accounts should help shift the national dialogue and consensus toward a more realistic view of the limits of our national resources as we approach the next decade and focus attention on the necessity to make difficult choices from among programs that, on a stand-alone basis, appear very attractive." [emphasis added]
"Accrual-based revenue and outlay projections, tied to a credible set of economic assumptions, tax rates, and programmatic spend-out rates, can provide important evidence on the long-term sustainability of the overall budget and economic regimes under alternative scenarios."6
6"In general, fiscal systems are presumed stable if the ratio of debt in the hands of the public to nominal GDP (a proxy for the revenue base) is itself stable. A rapidly rising ratio of debt to GDP, for example, implies an ever-increasing and possibly accelerating ratio of interest payments to the revenue base."
What Chairman Greenspan is suggesting is that tax cuts today coupled with higher Social Security and Medicare outlays in the next decade could lead to a "rapidly rising ratio of debt to GDP next decade. When looked at on an accrual basis, current tax cut proposals might not cause an explosion in the debt-to-GDP ratio in the next five years, but to an exploding ratio in the next ten years. This appears to be a shot across the Bush Administration's bow with regard to its proposed "jobs and growth" policy.
Another dis to the Bush administration is Greenspan's following statement: "[E]conomic growth cannot be safely counted upon to eliminate deficits and the difficult choices that will be required to restore fiscal discipline." The Bush administration has argued that to a greater or lesser extent that we can "grow our way out of budget deficits."
Still another dis came in the Q &A when Chairman Greenspan stated that higher budget deficits put upward pressure on interest rates. On this issue, the Bush administration has adopted the cigarette industry's defense - there is no conclusive evidence to prove it.
I want to close with two thoughts. Firstly, I do not necessarily endorse Chairman Greenspan's implicit criticisms of the Bush administration's jobs and growth fiscal proposals. Rather, I am just arguing that Chairman Greenspan's implied criticisms would seem inconsistent with behavior conducive to re-appointment. Secondly, it is regrettable that Chairman Greenspan did not bring up the concept of accrual accounting in 2001 when he tacitly endorsed the Bush administration's tax cut proposal of that time. Instead of endorsing a tax cut as a use of the big federal budget surplus existing in 2001, Chairman Greenspan might have recommended that the surplus be used to transition Social Security into a privatized and true retirement insurance system. This was a missed opportunity. It is not clear when another opportunity for this will arise again.
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