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.

Most if not all of our economic advancement comes from extraction.  We take from nature that which we have found useful.  This simple model has managed to elevate billions of people out of poverty.

Unfortunately this model contains the seeds of its own destruction.  It may take a while to destroy, but the fundamental fact is that much of what we extract is of finite supply.  And mother nature can’t make more fast enough for our extraction model.

Even organic farming, one of the few industries that adds to nature, still depends upon machinery.  Base energy production could eventually become close to sustainable as it moves away from the extraction model.  But here again, it takes machinery.

So even if we become less dependent on extraction for energy, and more organic farming adds nutrients to the soil, we still need to extract from the earth material we cannot replenish.

Nature does show us how to extend the life of our extraction model, however.  Nature recycles everything.  So must we.  

Here’s a brief article explaining how Europe is approaching this opportunity.  It’s from the European Commission.

“The EU is aiming for a significant cut in the amount of rubbish generated, through new waste prevention initiatives, better use of resources, and encouraging a shift to more sustainable consumption patterns.

The European Union’s approach to waste management is based on three principles:

1. Waste prevention:  This is a key factor in any waste management strategy. If we can reduce the amount of waste generated in the first place and reduce its hazardousness by reducing the presence of dangerous substances in products, then disposing of it will automatically become simpler. Waste prevention is closely linked with improving manufacturing methods and influencing consumers to demand greener products and less packaging.
2. Recycling and reuse: If waste cannot be prevented, as many of the materials as possible should be recovered, preferably by recycling. The European Commission has defined several specific ‘waste streams’ for priority attention, the aim being to reduce their overall environmental impact. This includes packaging waste, end-of-life vehicles, batteries, electrical and electronic waste. EU directives now require Member States to introduce legislation on waste collection, reuse, recycling and disposal of these waste streams. Several EU countries are already managing to recycle over 50% of packaging waste.
3. Improving final disposal and monitoring: Where possible, waste that cannot be recycled or reused should be safely incinerated, with landfill only used as a last resort. Both these methods need close monitoring because of their potential for causing severe environmental damage. The EU has recently approved a directive setting strict guidelines for landfill management. It bans certain types of waste, such as used tyres, and sets targets for reducing quantities of biodegradable rubbish. Another recent directive lays down tough limits on emission levels from incinerators. The Union also wants to reduce emissions of dioxins and acid gases such as nitrogen oxides (NO_x), sulphur dioxides (SO₂), and hydrogen chlorides (HCL), which can be harmful to human health.”

Beezer here:  This train of thought came directly from a post at economist’s view, which highlighted an article by Paul Collier, entitled “Toward a New Ethics of Nature” that appeared in the Financial Times.

One of the commentators to this article was someone writing under the handle “Organic George.”   Here’s organic george’s take on the subject.

Yes us romantics created organic farming; a bunch of back the land hippies with degrees in English Lit were able to create a $24 billion dollar US industry in 2 decades without support, in fact over the objections of the US government, Land Grant Universities, and Ag industrial.

Yep, we created a new workable, long-term sustainable, world-wide industry without the help of econometric modeling.

In organic Ag we build soil for the next generation, we do not use synthetic pesticides, fertilizers or misuse raw manure, all of which are responsible for the dead zone in the Gulf of Mexico (Gulf Hypoxia), death of the Chesapeake bay, polluted ground water, pesticide laden rain in the Midwest, etc. Conventionally grown food does not include the down stream cost of chemical farming, if it did conventionally grown food would be more expensive than organic.

Us romantic environmentalist have long understood intrinsic value of nature; it’s the econometric models that show extraction from nature is better than working with nature.

These economic models tell us that treating farm animals as widgets of industrial production is good business. Animals standing in their own filth 24/7, in confinement spaces so small it’s difficult for the animal to do anything but stand in one place to eat and sleep. Econ models lack any humanity, it’s all about the lowest-dollar-cost at all cost.

This is why the US middle class is disappearing so quickly, these extraction models have created a form modern day colonialism. Look at the history of colonialism around the world and you will find the same pattern of wealth extraction to the detriment of the local populations. The multiplier effect for US Ag dollars, once as high as 7 to 1 now is at best 1 to 1, resulting in little or no money flows to the rural economies, leading to their continued decline as money transfers from rural areas into corporate coffers.

Couple this with industrial Ag’s dependence on taxpayer dollars to support commodity farmers, which keeps the cost of raw Ag commodities artificially low, coupled with the taxpayers $150,000,000.00+ dollar bailout last year of the corporate hog producers and you can easily see the flaws in the industrial Ag models.

Organic farming is about respect; for the earth, the people working the land and the consumers who buy our products. Organics may not meet the current definition of economic efficiency, but we are sustainable.

What is needed is less dependence on mathematical models and more dependence on humanity.”

Beezer again.  It’s posts and commentary like this which have made economist’s view one of the most popular economics oriented blogsites on the internet.  The blog’s host, professor Mark Thoma, has created a huge aggregation of economic oriented thought which is as timely as it is voluminous.  Whatever is news of the day, becomes dissected almost as quickly at economist’s view.  It’s a must visit site.

It’s kind of funny to hear the Wall Street apologists complain about “Class Warfare” when the Government begins to become interested again in regulation.

Obviously the poor, if they’ve been conducting class warfare, haven’t been doing a very good job of it.  On the other hand, the Rich must be doing a very good job of it.   As it turns out the rich have recently been doing a remarkably good job of it, even by historical standards.  Which as it turns out can be quantified (other than just pointing out someone has a ton of money).

This from an article in the Financial Times here.

“The answer is capitalism’s dirty little secret: excessive lending was the only way to maintain the living standards of the vast bulk of the population at a time when wealth was being concentrated in the hands of an elite.

The amount by which the elite has benefited is startling, and illustrates the problem with lightly regulated free markets: the rich get much richer while the rest do not get richer at all. According to Société Générale economists, the inflation-adjusted income of the highest-paid fifth of US earners has risen by 60 per cent since 1970, while it has fallen by more than 10 per cent for the rest. As was recently pointed out in the New York Review of Books, the Walton family, of Wal-Mart fame, is wealthier than the bottom third of the US population put together – about 100m people. These are staggering statistics, confirmed by measures such as the US and UK’s ever-rising Gini coefficients, which estimate income disparity. Another way of putting this is that the share of profits in gross domestic product is at a 100-year high, or was until very recently.”

Beezer here.  And the financial crisis that has ensued (income disparities rose dramatically leading up to the stock market crash of 1929 and the Great Depression) has merely sped up the necessary adjustments for deleveraging.  There was a three year gap, it should be noted, between the stock market crash and when the national economy officially plunged into depression.  In fact the stock market recovered nearly all of its losses by 1930, but then rolled over down to the lowest levels of the 20th century not to return to the previous levels until 1954!