Greenspan Believes Bush Tax Cuts Should Be Allowed To Expire.
Former Federal Reserve Bank Chairman Alan Greenspan, in a Financial Times interview, reveals that he believes the Bush tax cuts should be allowed to expire as planned.
Greenspan, still referred to as “the Chairman,” is still the same laissez faire advocate familiar to those who take the time to watch the Federal Reserve. Although his sterling reputation has been seriously damaged by the financial collapse of 2008, he seems unconcerned about that in this interview — at 84 years of age such setbacks apparently dim in importance.
Here’s the relevant quote in the FT article:
“The other part of his record seized on by critics, especially Democrats, is his support for two rounds of tax cuts. One came in 2001 at the beginning of the administration of President George W Bush and one two years later. The week before we met, with an eye to the US’s huge fiscal deficit, he told an interviewer that he supported reversing those tax cuts, a remark seized on by his detractors to argue that he was irresponsible to have backed them in the first place. Here, too, he has a carefully worked-out response. One, both administration and congressional forecasts back then predicted huge fiscal surpluses, so a tax cut was quite sensible. Two, he argued at the time that a second round of cuts should be made conditional on how the economy and the public finances developed, which they were not. Three, he underestimated how his words would be seized on to justify reducing taxes willy-nilly, and he has already admitted that mistake in his 2007 memoirs, The Age of Turbulence. “Criticisms are wholly deserved when you’ve done something wrong, I grant you,” he says. “But I still prefer when I’m criticised that it be accurate.”
Beezer’s long argued that the obsession over tax cuts, and truthfully over monetary tools in general, has prohibited public discourse about other more important dynamics for maintaining robust economies. Sensible, progressive tax tables that are kept unchanged, provide an all important stability in planning and additionally help pay down government debt accumulated in recessions, while providing surpluses when times are good. Constant fiddleing with tax rates are a waste of time, in other words. The more important issues are balanced trade, tariffs, currency manipulation, industrial policies aimed at full employment, innovation and capital investment, among many others.
That Greenspan, the icon of regulatory forebearance (blind regulation), thinks a return to the Clinton tax tables is interesting. What’s amazing is that the media completely ignores his viewpoint now. Republicans, to a man and woman, still maintain tax cuts are the cure to all evils. Despite their guru acknowledging they aren’t.
No wonder we can’t get out of our own way.
As per usual, thanks to Mark Thoma’s economist’s view blog for highlighting this interview.
Tags: Alan Greenspan, Economist's View, Financial Times, mass media, Regulatory forbearance, Republicans, Tax cuts