Former Federal Reserve Chairman Alan Greenspan discussed the future of the economy on NBC’s Meet The Press and honed in on the Bush tax cut extension proposed by Republicans in Congress and unemployment:
In an interview on NBC’s “Meet the Press,” Greenspan expressed his disagreement with the conservative argument that tax cuts essentially pay for themselves by generating revenue and productivity among recipients.
“They do not,” said Greenspan.
“I’m very much in favor of tax cuts but not with borrowed money and the problem that we have gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money,” he said. “And at the end of the day that proves disastrous. My view is I don’t think we can play subtle policy here.”
Tax cuts with borrowed money? In Greenspan’s defense, he did note that spending with borrowed money is an issue. But let’s be clear. Tax cuts are NOT borrowed money. Congress has spent money that they did not have available. To do this, they borrowed money. Now, to pay off this borrowed money they have to raise taxes, because clearly cutting spending is not an option for them.
It is not at all necessary to borrow money to let anyone keep the money they earn. What is necessary is for Congress to not spend money that they don’t have in the first place.
Mr. Greenspan’s low interest rate policies were the primary mechanism responsible for the outrageous real estate prices we experienced from 2002 to 2007. It was his policies that essentially led to to excessive borrowing not only for home purchases, but everything from cars to iPhones. But since it was his idea, borrowed money on the consumer side doesn’t seem to be at issue for him.
“I see it [as] we just stay where we are,” he said. “There is a gradual increase in employment but not enough to reduce the level of unemployment …There is nothing out there that I can see which will alter the trend or the level of unemployment in this country.”
There is NO INCREASE in employment, Mr. Greenspan. We are not adding jobs. The BLS is doing nothing more than a head-fake with the numbers by categorizing those people who have lost their unemployment benefits and those who have been out of work for a year as “no longer in the workforce.” Just because someone can’t find work for a year does not mean they are out of the workforce. Most of these people want jobs, the problem is, Sir, that there are no jobs to be had. This is the reason why we are not seeing the “official” unemployment rate trending higher – fuzzy math.
We differ on what the trend is. Based on his statement Mr. Greenspan believes we’ll stay stagnant on employment. This is far from being the truth. The trend is that consumers are spending less, making less, have less credit and are up to their necks in existing debt that they can no longer service. This, not an extension of President Bush’s tax cuts, is disastrous. The trend is not stagnation in terms of employment. We are going to lose more jobs. Whether the BLS counts the numbers correctly is one thing, but the reality is that we will continue to lose more jobs going forward.
Now that we understand what the trend really is, we can agree with Mr. Greenspan’s last statement that there is nothing that is going to alter this going forward.
We are in a downward spiral, and a lack of jobs is the elephant in the room.