Grownup Republican Watch: Alan Greenspan

He tells the Joint Economic Committee:

Latest News and Financial Information | Reuters.com: "Greenspan calls for pay-go, U.S. budget restraint: Thu Jun 9, 2005 11:01 AM ET: WASHINGTON, June 9 (Reuters) - Federal Reserve Chairman Alan Greenspan on Thursday called for budget restraint, saying the United States will face severe fiscal pressure as the huge post-World War II baby boom generation retires. Greenspan, in comments to the congressional Joint Economic Committee, reiterated his call for the renewal of pay-as-you-go, often called pay-go, provisions that compel lawmakers to show how they will fund any spending initiatives or tax cuts. 'I have argued ... that fiscal policy as it moves into the early part of the next decade is going to run into very severe problems unless we restore pay-go and other means of restraint on the system,' Greenspan said. 'Something very unusual is about to happen to this country in that we're going to get a huge exodus from the labor force and remember that the baby boom generation was followed by the baby bust generation, which means we have fewer workers on average ever increasingly as we move into the next decade and beyond, to produce the goods and services that are required, not only for the workers and their families but for the huge increase in retirees,' Greenspan said.

Comments

[Barry]

Brad, it's far, far too late. Grenspan did his best to get us into this; he's guilty.

This is just phase 2 of the Reagan cycle: after looting the place, insist on a strict regime of rebuilding, to prepare for the next stripping.

Interestingly enough I remember reading in some military history magazine about the Mongols employing that same tactic. They'd wait a few years after trashing a place, so that it could partially rebuild,
but not long enough to get strong again.

[theorajones]

Wait, those tax cuts were a bad idea? If only we'd had this information 4 years ago! Oh, wait...

[quixote]

What a jerk. Where was this turkey in 2000? In 2004? Keeping his mouth shut while the bank was robbed. Now suddenly it's time to get all responsible. Why am I feeling this recurrent gag reflex?

[me]

And he is just as pathetic at forecasting as his history shows when he says the economy, and jobs in particular are in great shape. Damn, where are the days of too much surplus?

[anne]

Though I can grumble about the lack of sight in supporting a tax cut in 2001 that was other than really temporary or provisional, there are Bard DeLong and Paul Krugman who were worried about the cuts proposed even during the Presidential campaign in 2000 but there were all too few others.

[Russil Wvong]

"Brad, it's far, far too late."

It's never too late to start fixing the problem instead of making it worse.

[repoman]

Pay-go? hehehe, you pay and they go spend! hehehe...

[Kimmitt]

Is the Beast Starved yet?

[Tom Cecere]

The Republican congressional majorities will go right back to "pay-go" the minute we elect a Democratic president. It's the only modern combination of parties that can show any fiscal restraint. (Kinda catchy for a bumper sticker, eh?)

[david]

Pretty soon he's gonna go back to his previous grownup schtick and tell that payroll taxes need to go way up.

[Ottnott]

Greenspan worried that:
"remember that the baby boom generation was followed by the baby bust generation, which means we have fewer workers on average ever increasingly as we move into the next decade and beyond, to produce the goods and services that are required"

Sheesh, Al, you are always one problem behind. We've already solved the worker shortage problem with a combination of pension-plan failures and negative growth in personal income to forc...er...encourage workers to stay on the job into their 70s. That, together with massive outsourcing and total disinterest in enforcing laws against employing illegal immigrants solves any problems with labor shortage.

The new problem is where to export those 70-somethings once they start requiring large amounts of healthcare. There's a limit to how many can be arrested for terrorist links and shipped to Egypt and Uzbekistan.

[matt]

Mr. Greenspan is a puppet to the Bush administration, just like everyone else --- the judicial branch, the legislative branch, state and local gov't, etc... Bush and Cheney and Company live on cover-ups, bribes, and corruption. Start the impeachment process today before Bush destroys America even further.

[pebird]

Thank god with all those people leaving the labor market, I can work till I'm 80 to pay off my debts.

[Movie Guy]

Some of his gloss over pat answers to questions during the followup Q&A were disgusting.

Maybe he'll come out of retirement later on (post-bubble) to once again promote variable interest rate mortgages. Can't you see the commercials...

[kharris]

Greenspan is as much a captive to his own ideology as that of the White House. Under this president, though, it's sometimes hard to see any difference. He keeps saying that the widening income gap is bad for a democracy, but he then insists education is the solution. Education is a very good thing, but no amount of education will overcome the tax benefits that have been granted to the rich, with Greenspan's blessing. He just cannot admit that widening income differences and concentrations of wealth are due to labor and tax policies, as well as education.

[Kimmitt]

It's the only modern combination of parties that can show any fiscal restraint. (Kinda catchy for a bumper sticker, eh?)

The Dems did fine in '93-94.

[Jussi]

I'm hoping Brad will also post on Greenspan's replies to the questions on unequal wealth distribution.

[scottynx]

Be wary about supporting paygo: It would force the choice between tax cuts and spending increases (we need to pick on). I suspect that liberals/democrats hope that spending increases would win out in a political fight, thus necessitating tax increases by paygo law. What if you are mistaken? Instead tax cuts might win out (take American exceptionalism into account) , thus necessitating spending cuts or lack of growth in spenging by pay go law. Anyone wanna bet which will win? Do you want to take the risk?

[th]

Greenspan lent critical support to Bush's irresponsible tax cuts and now he thinks we need to "reform" social security and cut spending. That places him squarely within the Grover Norquist camp. Perhaps Greenspan will be holding Uncle Sam's feet while Grover Norquist holds his head underwater in the bathtub.

[liberal]

scottynx wrote, "Be wary about supporting paygo: It would force the choice between tax cuts and spending increases (we need to pick on)."

Not necessarily. PAYGO refers to taxes and so-called mandatory or direct spending only (which is mostly entitlements). It does *not* cover so-called discretionary spending (which is essentially everything except for entitlement spending).

The Budget Enforcement Act of 1990, and subsequent revisions, worked at deficit reduction throw a two-fold mechanism: PAYGO for taxes and mandatory spending, and spending caps for discretionary spending.

AFAICT the historical reason for this dichotomy is that both taxes and mandatory spending are controlled by authorizing committees, whereas discretionary spending is controlled by appropriations committees. (And of course this is also reflected to some extent in the laws themselves: dicretionary spending is time-limited (usually 1 year chunks) of money; taxes and entitlements are both written into permanent law and essentially don't have to be reappropriated year after year.)

[liberal]

The crucial thing AFAIC is whether Greenspan's version of PAYGO includes sunset provisions in the Bush tax cuts. Meaning, my impression is that the PAYGO view would have taxe increases after sunset figured as part of baseline, i.e., not really tax increases, because the sunset provision itself is part of current law.

My hunch is that Greenspan wants extensions of tax cuts beyond their sunsets to not be covered by PAYGO.

[bellumregio]

kimmitt: "Is the Beast Starved yet?"
Do you think Greenspan knows the game or is he an independent actor? Is he Norquist with a heart or Norquist without one?

[ccobb]

No one who sees Ayn Rand as a major philosophical figure deserves to be called a grownup.

[BroD]

Translation: "Things are gonna get so bad we're gonna have to call in the Democrats to clean up this mess.

[Noppon Sagnanert]

Dear professor Delong,

My name is Noppon Sagnanert, a PEIS student. I was just wondering when your are availible this summer. Can I set up an appointment with you sometimes?

Noppon Sagnanert
s_noppon@berkeley.edu

[Dave]

I have to agree that it is never too late to fix a problem. Paygo was almost implemented this year as proposed by Senator Feingold(D-WI). If I remember the budget amendment failed only 1 vote short.

"Greenspan... reiterated his call for the renewal of pay-as-you-go, often called pay-go, provisions that compel lawmakers to show how they will fund any spending initiatives or tax cuts."

Don't let your partisan hate of Greenspan prevent him from supporting a good thing. The key is to make a rule that can't be easily changed the next time a simple majority of Congress wants to spend more money. The next President is likely to be a Democrat, that doesn't mean that if Bush's last actions are to force a balanced budget for his successor that we should oppose it simply because he didn't live by the same rule. A good rule is a good rule.

[JimPortlandOR]

Matt says: "Bush and Cheney and Company live on cover-ups, bribes, and corruption"

dare may I add: LIES, distortions, withholding information from the Congress and people?

[JimPortlandOR]

oh, and The Mummy has returned....

[Barry]

Me: "Brad, it's far, far too late."

Russil:

"It's never too late to start fixing the problem instead of making it worse."

It's never too early to stop trusting the people who screwed us over in the first place.

[Kimmitt]

Do you think Greenspan knows the game or is he an independent actor?

Based on his endorsement of the Bush tax cuts, I'd say he's the best player of this game alive.

[jerry]

Shame on you Brad. For someone that plays up your affinity for physics and the logic of the Greeks, you sure are obscuring the facts in this post.

There is absolutely no way to count Greenspan as one of the grownup republicans. He sold his soul many years ago.

[chris]

Suddenly everyone is snarky on Greenspan today. Whatever happened to the learned men stroking their goatees admiring the inflation treating, bubble mending record of the maestro? I already called for Honey, Duke's assistant from Doonesbury, to stand as his translator. I think Mr. Magoo, erh, Greenspan recently made a trip to China where he could have used Honey's talents. Let Honey manage Magoo's reputation.

[liberal]

Dave wrote, "A good rule is a good rule."

Yes, but that doesn't mean Greenspan would support a good rule.

As I wrote above, a good question is whether he thinks legislation extending the Bush tax cuts beyond their sunset should be covered by PAYGO. I wager "no".

[pragmatic_realist]

'Something very unusual is about to happen to this country ...'

??? I am at a total loss for words.

[bakho]

Is it reasonable to assume that the boomers will retire and no one will step in to fill those jobs?
If the jobs are there, won't the labor force participation rate increase and companies import workers to fill openings?
Won't those additional workers pay additional SS taxes into the system?
Would doubling the minimum wage double the SS taxes paid by minimum wage workers?
Is it reasonable to expect that demand for goods and services will go bust when boomers retire?
Will boomers choose a bloated military over a decent retirement?

These are a few reasons why Greenspan's dire warnings on SS ring hollow

[curious]

At some point, won't immigration policy have to change in response to aging population pressures on tax and benefit payment balances?
I seem to recall discussions of that taking place already in Europe and Japan.
Shouldn't we already be talking about changing the temporary visas for workers in unfilled job categories into permanent resident/immigration visas, and increasing both the number of categories and the number of visa limits to something closer to the gap in qualified applicants.
For example, both nursing and skilled construction workers have significant shortfalls. If I recall correctly, we are not admitting enough nurses, and not admitting any construction workers under the visa programs.
The political issue of alleged job displacement by immigrant labor could be addressed by keeping the immigration rate lower than the measure shortfall (i.e. admitting enough to fill 80% of the prior year's unfilled positions), leaving positions for the long-awaited, (perhaps illusionary) retrained displaced workers.
I expect someone will tell me what I am missing here, but this seems fairly obvious, yet doesn't seem to even be under discussion. Has promotion of increased legal immigration replaced Social Security as the third rail?

[bakho]

It's harder to discuss SS private accounts or SS phaseout if we will have an increase of immigrants that will be paying SS taxes in the future.