Quotes from Alan Greenspan's talk
I've come to the conclusion that the best way to cover these events is jot down interesting quotes and leave my analytical take for later. Listen first, analyze second. So this post will just collate some of Greenspan's more interesting comments. This is rush transcription, so every word may not be exact.
"We had a major economic acceleration coming out of the economic crisis, and it was very impressive. until May. And then it's like we've hit an invisible wall."
"The question is not all that difficult once you recognize that there is far greater momentum in the budget deficit and in spending than in the official figures. Once you have spent $1.2 trillion it's very hard to say no to a constituency group that wants $4 billion."
"You have to ask yourself what job spending will do. It does increase GDP. Always has, always will. The question is, how long can you do it? The original theory was that you prime the pump for the private sector. There is no evidence that has happened. The housing credit, for instance, just moved housing purchases forward, it didn't expand the market. Cash for Clunkers was a very similar situation."
"After stimulus, the deficit will come down, But then it will go up again, mainly due to the major long-term problem, which is Medicare spending, and we don't know what it will be. And we need to remember that if our estimations are wrong, it's far more of a problem if we've underestimated the deficit. If we've overestimated it, it's always easy to spend more."
"It's very hard to see unemployment going below 9 percent for the rest of this year."
"I wouldn't favor increasing immigration solely for the purpose of propping up the housing market. But we have two immigration problems, each on one end of the income scale. The notion that immigration negatively affects living standards in the United States is wrong. Undocumented immigrants add very significantly to the American economy. And on the other end of the income distribution, the restrictive quotas do us enormous damage. We need to stay on the cutting edge. And our schools are failing. We don't always have the technical skills we need. If we don't get them from somewhere else, we'll finds ourselves falling behind others. The way to get them is to import them from abroad."
"If we did what Greece is doing, we could come to grips with the [deficit] problem."
"What I would've liked to see in financial reform was a diagnosis of the problem and then an effort to address it. What the data show is that we had inadequate capital for decades. The way we know that is the fact that when the crisis came upon us in 2008, we had this huge bill to taxpayers. That bill is the degree of subsidization we had for years when there was inadequate capital. Before the crisis, in the 50s and 60s and 70s, the system had 10 percent capital, which seemed reasonable. But then we learned that there were tail risks that we had never actually observed. The tail is not fat, but obese. We need a lot more capital going forward. If that had been done in the early years, the bubble would have risen and collapsed, but the losses would've been absorbed by the common shareholders of individual investment institutions."
"This [financial regulation] bill has a few good things in it, and one of them is the fact that it does address the capital problem, but it does so by placing great discretion on the Federal Reserve and other regulators. But I am very uncomfortable with the provision that empowers the Federal Reserve to seek out crises and try to take actions in advance of that. As it stands now, I would be very uncomfortable voting for it."
"I cannot conceive of a politically feasible solution to this problem which will overdo cutting the deficit, where overdoing means harming the economy. It might be technically possible, but it is not realistic."
"Coming to the issue of taxes, this gets to the more fundamental issue of the effects of taxation and spending cuts. There are several studies out there evaluating past efforts at fiscal restraint that show the heavy weight of successful contraction has been on the spending side. There's some question of the data, in that you only have 25 observations and they're all unique and so homogenizing them is difficult, but the general conclusion is that you cannot successfully attack fiscal problems through taxes. A bit value-added tax will cure the budget deficit temporarily, but the spending forces that generated it are still im play. But if you cut spending, it's a different base. And there are unquestionable studies showing that higher the level of taxation in the system, the less viable and innovative is the economy."
Back in 1982, when we had our Social Security commission, we decided Medicare was too difficult to handle, and we had 25 years to deal with it. Now it's 25 years later and nothing has been done."
"I don't see how you [sharply cut deficits] without evidence of fiscal strain. Fiscal strain shows up either as crowding out, inflation, or higher interest rates. There is some crowding out that we can measure, but not much. There's no inflation. And interest rates are, if anything, falling."
I didn't get the exact quote on this, but Greenspan ended his talk by saying that health-care costs were a long-term disaster, and eventually, we were going to have to accept some form of rationing. We obviously ration right now, but not in programs like Medicare, which are on the federal books.
Posted by: guesswhosue | July 9, 2010 3:12 PM | Report abuse
Posted by: justin84 | July 9, 2010 3:19 PM | Report abuse
Posted by: ostrogoth | July 9, 2010 3:52 PM | Report abuse
Posted by: AttentionDeficit | July 9, 2010 5:37 PM | Report abuse
Posted by: bakho | July 9, 2010 6:30 PM | Report abuse
Posted by: andrewbaron78 | July 9, 2010 8:13 PM | Report abuse
Posted by: henryjose09 | July 10, 2010 6:11 AM | Report abuse
Posted by: janinsanfran | July 10, 2010 11:09 AM | Report abuse
Posted by: grooft | July 10, 2010 12:41 PM | Report abuse
The comments to this entry are closed.