Wednesday, March 16, 2005

Greenspan Finally Taking Heat for Tax Cut Endorsement

Alan Greenspan, the chairman of the Federal Reserve, defended himself on Tuesday against Democratic lawmakers who say he contributed to soaring budget deficits by endorsing President Bush's tax cuts in 2001.

Mr. Greenspan acknowledged that he and many others had been wrong to expect trillions of dollars in surpluses that never materialized.

But in testimony before the Senate Special Committee on Aging, he said almost all budget analysts were predicting a stream of large surpluses at the time.

"I look back and I would say to you, if confronted with the same evidence we had back then, I would recommend exactly what I recommended then," Mr. Greenspan said. "It turns out we were all wrong."

His defense was a response to rising criticism from some Democrats.

Senator Hillary Rodham Clinton, Democrat of New York, told Mr. Greenspan on Tuesday that his support for tax cuts had set the stage for the government to spend surpluses that were building up in the Social Security trust fund's "lock box."

"Your testimony helped blow the lid off the lock boxes when it came to the size of the tax cut, the extent of the tax cut," Mrs. Clinton said.

Senator Harry Reid of Nevada, the Senate Democratic leader, recently called Mr. Greenspan "one of the biggest political hacks" in Washington. On Monday, Senator Byron Dorgan, Democrat of North Dakota, called Mr. Greenspan an "enabler" of the administration's fiscal policies. The criticism has intensified partly because Mr. Greenspan has cautiously supported Mr. Bush's idea of letting people divert some of their payroll taxes to private retirement accounts.

Most analysts say Mr. Bush's plan would force the government to borrow trillions of dollars over the next several decades, because the government would have to pay full benefits to people who are at or near retirement age right now. Supporters say the government would recoup the cost as future retirees get most of their benefits from private accounts rather than the government.

Confronted by Mrs. Clinton, Mr. Greenspan said his support for tax cuts in 2001 was based on nearly unanimous expectations of large budget surpluses for many years, a cumulative surplus of $5.6 trillion by 2011, according to the Congressional Budget Office at the time.

"We were confronted at the time with an almost universal expectation amongst experts that we were dealing with a very large surplus for which there seemed to be no end," Mr. Greenspan said.

Mr. Greenspan acknowledged that he had wanted to reduce the budget surplus, but said he also proposed "trigger" mechanisms for Congress to re-evaluate the tax cuts if the budget forecasts proved wrong.

As it turned out, federal deficits rose as tax revenues plunged for three years in a row and spending increased in areas including war costs, education and domestic security. What was expected to be a $5.6 trillion surplus by 2011 is now expected to be at least a $4 trillion deficit by 2015 if the tax cuts are made permanent.
Source: 'Greenspan Defends His Support of Tax Cuts', Edmund L. Andrews, New York Times, March 16, 2005

Friday, March 04, 2005

Consumption Tax?, Spending Cuts, and much more

Federal Reserve Chairman Greenspan's suggestion that the USA implement a consumption tax is just another in a long series of policy assaults against average Americans. To read text:

A consumption tax would be a national sales tax on all goods and services purchased by Americans. It would hit hard poor and middle income Americans who pay little or no income tax because they do not earn enough or have big families. Under a consumption tax all Americans would be paying no matter how much they make or don't, whether they are retired, or disabled. Even if we implemented rebates for the poor, as Greenspan recommends, they would still be losers.

The consumption tax proposal comes on the heels of other recent comments by Greenspan all designed to wage class warfare. Two weeks ago Greenspan was blessing President Bush's social security reform plan and private accounts--Neocon's have publicly stated that Bush's reform plan is the start of the dismantling of social security. A few days earlier Greenspan was recommending spending cuts to reduce the deficit--a deficit that he helped create when he flip-flopped in 2001 on fiscal austerity and endorsed the Bush tax cut.

Americans should not ignore the Fed Head's comments because they hold powerful political sway in Washington. We also need to realize that the Federal Reserve has gained God like status as we have reduced fiscal policy in favor of monetary policy, which the Fed controls. The more that we have downsized and privatized the more power we have transferred to the Federal Reserve.

To this Fed Watcher, Greenspan's recent comments are atypical. Greenspan is known for mincing his words, he has not done so recently. He only speaks out when wants something or when his free market ideology is threatened. For example, when the Enron scandal broke and free marketers were running for cover Greenspan spoke out and said that we must not interfere or pass laws, instead we should let the market run its course.

Given Greenspan's comments either a larger battle is brewing--something beyond social security--or Greenspan senses the tide is beginning to turn against the Presidents plans and free market ideology. What is clear is that Greenspan is doing as the creators of the Federal reserve envisaged and the second national bank of America before that--to wage class warfare and make the rich richer.

Wednesday, March 02, 2005

More Class Warfare from the Fed Head

Fed Head Alan Greenspan waged further class warfare during his recent Humphrey Hawkins Testimony before congress (February 16/17, 2005).

By approving President Bush Social Plan of "private accounts', albeit with a "go slowly" approach Greenspan was blessing Bush's attempt to radically alter Social Security--a program that has benefited a multitude of Americans in need.

Greenspan again opted for spending cuts over tax increases as a means of reducing the budget deficit. Some in the media noted that Greenspan was less staunch in his advocacy for not raising taxes when talking about the budget deficit. "You're going to have to increase taxes or reduce spending somewhere, if you're going to keep the deficit under control", Greenspan said. Other comments clearly showed that he favors spending cuts over tax increases.

The democrats were unable to get Greenspan to denounce the Bush tax cuts permanent. The Fed Head pointed out the benefits of the tax cuts; "The evidence does indicate that the economy was significantly supported by the tax cuts in their initial form,'' he said. In typically Greenspeak he refused to openly endorse making the tax cuts permanent; ``But that, of course, has nothing to do with tax cuts going forward in any material way.''

The Bush tax cuts are a major component of what created the budget deficit.. The deficit then became the birth mother for Bush's draconian budget proposal that would devastate much of the aid to the poor and middle class Americans. It was Greenspan's endorsement of the proposed tax cuts in 2001 that helped push them through Congress.

All in all the Greenspan's Humphrey Hawkins testimony was a victory for President Bush to wage war on Social Security. It also was another glimpse of how the Federal Reserve, and Alan Greenspan in particular, continues to wage class warfare.

This page is powered by Blogger. Isn't yours?