StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Greenspan's curveball

16 Jul 2010
Posted by Edmund L. Andrews
Like Pete Davis, I was somewhat amazed to see Alan Greenspan tell Judy Woodruff on Bloomberg TV that we should let all the Bush tax cuts expire on January 1.
This is, after all, the man who gave a crucial green light to Bush's 2001 tax cuts, and all the others, and then watched as huge surpluses were replaced by soaring deficits. 
But I can't shake the suspicion that Greenspan is throwing a curveball.   Having been worshipped as the great wise man of economics for years, Greenspan's reputation has since collapsed almost as quickly as the housing bubble.  How better to restore one's luster than by proposing an idea so courageous and iconoclastic that it will never happen?
Republicans will obviously dismiss his idea out of hand, because they have promised to bear any deficit in order to fend off any tax increase.   Democrats will reject it too, because they want to make the  tax cuts permanent for every family earning less than $250,000 a year.    
To be sure, Greenspan has always been a bit iconoclastic, and he hasn’t been on exactly the same page as Republican party leaders for quite a few years.
But his surprising new stance is at odds with his long-held views.  Greenspan always argued that the real fiscal problem was too much government spending. Tax increases should only be an absolute last resort.   In his recent Wall Street Journal op-ed, Greenspan warned in dire terms about the need to cut spending and barely mentioned higher taxes.
Greenspan's idea is also at odds with what most other economists, regardless of party affiliation, are recommending right now.   Given how weak the economy is, I don't hear anyone argue that a huge tax increase on people at every income level would be a good idea.  
Greenspan didn’t explain his economic rationale  He only said that people “misunderstand’’ the seriousness of the long-term fiscal problem.
Maybe.  But what I hear is a risky idea that sounds bold but never has to be tested.  If the politicians reject it, as they arguably should,  Greenspan can blame them for lacking courage.

I'm not just picking on you ....

.... but on every commentator that I have read recently ..... and being from NJ I have just gone through months and months of the same thing ....

Allowing previous, "temporary" tax cuts to expire IS NOT the same thing as a tax increase !!

While the affect maybe similar, the cause is not. These tax cuts were instituted for specific reasons and were specifically designated to expire at a certain point.

Not renewing a temporary tax cut is not the same as increasing existing taxes !!

Nothing inconsistent here

Nothing inconsistent here from Greenspan. He is a deficit hawk during democratic administrations and a tax cutter during republican administrations. On that he has always been consistent.

I have no patience for this subject, either

Let the tax cuts expire. Obama to country: "The Bush temporary tax cuts are set to expire on Jan 1, 2011. We are happy to extend the tax cuts for every American earning less than $250,000. If any other provision comes to my desk, I will veto the whole bill. Can I be any clearer? Democrats are for low taxes for working Americans. Rich folks can pay their fare share now that the Bush lunacy is over. If Congress doesn't pass a bill, it's the Republicans' fault. If they want all Americans to pay higher taxes, they can filibuster the Democratic bill. If they truly believe in lower taxes, they'll pass my bill. Either way, the only tax cuts being extended are for working families."

Not so sure about Greenspan's stance

I read greenspan's thoughts/memoir "the age of turbulence" not too long ago. In it, he portrayed his stance around the 2000ish budget surplus as that we needed to "fix" the long run social security/medicare deficit, using the current budget surplus. He says that what actually happened is that it all got wasted on tax cuts.

He seems to think of himself as an old-school fiscal hawk.

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