Greenspan Bashes Bush

[jdobbin]

http://www.msnbc.msn.com/id/20781873/

Former Federal Reserve Chairman Alan Greenspan, in his new book, bashes President Bush for not responsibly handling the nation’s spending and racking up big budget deficits.

A self-described “libertarian Republican,” Greenspan takes his own party to task for forsaking conservative principles that favor small government.

“My biggest frustration remained the president’s unwillingness to wield his veto against out-of-control spending,” Greenspan wrote.

And he goes on to say that the Republicans deserved to lose the mid-terms.

ush took office in 2001, the last time the government produced a budget surplus. Every year after that, the government has been in the red. In 2004, the deficit swelled to a record $413 billion.

“The Republicans in Congress lost their way,” Greenspan wrote. “They swapped principle for power. They ended up with neither. They deserved to lose.”

In 2006, voters put Democrats in charge of Congress for the first time in a dozen years.

How the party that championed small government came to believe that deficits don't matter is a mystery.

I don't think there is a political party in Canada on the federal front that could get away with the deficits don't matter philosophy. It has become deeply ingrained in the Canadian psyche now.

Hopefully Canada will begin to adopt a lower taxation model now that it has defeated its deficit. It is concerning that the last two governments went on a spending spree rather than keeping things at the rate of inflation.

[bush_cheney2004]

There was no real surplus because of offsetting Social Security and Medicare tax revenues. Greenspan rode on the back of Reagan spending sprees, waiting too long to cut rates in the early '90s.

Canada has a completely different set of priorities for the federal budget, and a GDP less than the single state of California.

In other words, the US has a much higher credit card limit.

Edited September 16, 2007 by bush_cheney2004

[Guest American Woman]

There was no real surplus because of offsetting Social Security and Medicare tax revenues. Greenspan rode on the back of Reagan spending sprees, waiting too long to cut rates in the early '90s.

Canada has a completely different set of priorities for the federal budget, and a GDP less than the single state of California.

In other words, the US has a much higher credit card limit.

Canada also has a population less than the single state of California.

As for a higher credit card limit, that means higher debt when pushing the limit, or as in Bush's case, going over the limit so to speak-- which is sort of the point of this thread, and nothing to brag about. Having a higher bank account balance is an accomplishment, while having a higher credit card limit/credit card debt isn't.

The national debt is enough to make any rational American cringe, jdobbin. I'm wondering where the money is going to come from-- as our dollar continues to drop on the world market.

Edited September 16, 2007 by American Woman

[bush_cheney2004]

President Bush is not responsible for all of the US public debt...indeed, presidents only propose federal budgets...Congress appropriates the funding and makes tax law. That includes Republicans and Democrats.

California's population is about 37,000,000...all of Canada is about 34,000,000. GDP's are nowhere near as close, even with a booming Alberta.

Debt is more of an issue in Canada because it has less capacity to service the debt.

Edited September 16, 2007 by bush_cheney2004

[jdobbin]

Canada also has a population less than the single state of California.

As for a higher credit card limit, that means higher debt when pushing the limit, or as in Bush's case, going over the limit so to speak-- which is sort of the point of this thread, and nothing to brag about. Having a higher bank account balance is an accomplishment, while having a higher credit card limit/credit card debt isn't.

The national debt is enough to make any rational American cringe, jdobbin. I'm wondering where the money is going to come from-- as our dollar continues to drop on the world market.

It's true that Canada has a smaller population and GDP than California. At one time in Canada, we too thought deficits didn't matter. We don't think that anymore and have dealt with the Canada Pension Plan and deficit spending. All the major political have taken the same stance on deficits in part because the Canadian people now believe it leads to hardship in the end.

AW, I agree that there is concern about the continuing deficits in the U.S. While there may be a larger credit limit, it remains a limit and it will eventually have to be paid. The prospect of a recession won't help in terms of reducing the deficit either.

Hopefully, some candidate...any candidate in the upcoming election will make deficit spending an issue. For better or worse, Canada has tied its future to a North American market and needs its strongest nation to confront the issue of the deficit.

[bush_cheney2004]

Hopefully, some candidate...any candidate in the upcoming election will make deficit spending an issue. For better or worse, Canada has tied its future to a North American market and needs its strongest nation to confront the issue of the deficit.

The US will never accept the restrictions imposed by Canada's fiscal housekeeping...an economic superpower does not have to. Ross Perot tried to win two campaigns touting responsible budgets and deficit reduction....he lost both times.

During the 1990's, Canada actually had a larger per-capita debt level than Americans. Did the US need Canada to slash health care spending and defense budgets....nope.

I wonder if Canada wanted the US to confront 100% deficits during WW2....hmmm...didn't think so.

Edited September 16, 2007 by bush_cheney2004

[August1991]

I don't think there is a political party in Canada on the federal front that could get away with the deficits don't matter philosophy. It has become deeply ingrained in the Canadian psyche now.

And the notion of "sound money" became deeply ingrained in the psyche in the 1930s. That doesn't mean it is true.

From link above:

“My biggest frustration remained the president’s unwillingness to wield his veto against out-of-control spending,” Greenspan wrote.

The problem in the US, as in Canada now, is out-of-control spending. Our politicians simply don't know how to say no.

In other words, the US has a much higher credit card limit.

The comparison to a credit card is weak unless you add a few more points. Imagine you will live forever and you also have free access to Bill Gates' (or Paul Desmarais') bank accounts.

----

As I have argued many times before, the problem is not deficits but spending. The Bush Administration has been a spendthrift (and protectionist to boot). Americans are not getting value for their money. This upward growth in government spending cannot continue.

Edited September 16, 2007 by August1991

[jdobbin]

And the notion of "sound money" became deeply ingrained in the psyche in the 1930s. That doesn't mean it is true.

From link above:

The problem in the US, as in Canada now, is out-of-control spending. Our politicians simply don't know how to say no.

I'm not sure what you mean by the first statement.

I am in total agreement about spending. While we don't have a deficit problem in Canada, it isn't for a lack of trying. There needs to be better control over spending.

On Friday, the Fed released figures on the deficit.

http://afp.google.com/article/ALeqM5gMyuHb...WxfSta2o7S6eNzw

Earlier this week, Federal Reserve chairman Ben Bernanke said the large US balance of payments deficit "cannot persist indefinitely" but for now is not an unduly large burden for the American economy.

He said the large US deficit to the rest of the world "cannot persist indefinitely because the ability of the United States to make debt service payments and the willingness of foreigners to hold US assets in their portfolios are both limited."

"Adjustment must eventually take place, and the process of adjustment will have both real and financial consequences," he added.

[jdobbin]

Here is some of the latest on Greenspan's book. He says lots of positive things to say about Clinton's economic policy versus Bush's.

http://www.cnn.com/2007/POLITICS/09/16/gre...book/index.html

Greenspan, an 81-year-old Republican who retired last year after five terms as Fed chairman, wrote that he made no secret of his view that Bush should reject some bills.

"It would send a message to Congress that it did not have carte blanche on spending," Greenspan recalls telling the administration. "But the answer I received from a senior White House official was that the president didn't want to challenge House Speaker Dennis Hastert. 'He thinks he can control him better by not antagonizing him,' the official said."

The White House, however, said that vetoes weren't necessary because Congress "worked with us."

"The Republican Congress stayed within the president's top-line numbers on non-national security appropriations bills. We had veto threats, which were used to good effect to keep spending within the president's numbers," said spokesman Tony Fratto.

Greenspan wrote in his book that the decision was costly.

"To my mind," he wrote, "Bush's collaborate-don't-confront approach was a major mistake -- it cost the nation a check-and-balance mechanism essential to fiscal discipline."

He further wrote that former Treasury Secretary Paul O'Neill "found himself the odd man out; much to my disappointment, economic policymaking in the Bush administration remained firmly in the hands of the White House staff."

Fratto countered that O'Neill and former Treasury Secretary John Snow "had the opportunity to present their ideas through the policymaking process. If ideas failed to carry the day, it probably had something to do with the force and logic of the policies being advocated, rather than anything about the 'process.' Ideas were considered, sometimes they achieved consensus, sometimes not -- nothing unusual there. At any rate, where we ended up on economic policy was right, as our records show."

"We're not going to apologize for increased spending to protect our national security," Fratto said. "That isn't just increased spending. It's an investment in the safety and security of the nation, which is also, by the way, an important economic objective."

Greenspan praised former President Clinton and his attitude toward economic policies, saying, "either Clinton shared many of my views on the way the economic system was evolving and on what should be done, or he was the cleverest chameleon I'd ever encountered."

Edited September 16, 2007 by jdobbin

[bush_cheney2004]

Here is some of the latest on Greenspan's book. He says lots of positive things to say about Clinton's economic policy versus Bush's.

That's all well and good for book sales, but a third party view is apt to be more balanced:

In short, Clinton's policies continued the upward redistribution of income and wealth, and punishment for the poor, that were the hallmarks of the Reagan era. It was not until 1999 that the median real wage reached its pre-1990 level, and it remains anchored today at about where it was 27 years ago.

Clinton's foreign economic policy was similar, although more devastating. His administration, together with its allies at the IMF and the World Bank, presided over the destruction of the Russian economy, helped to cause and worsen the Asian economic crisis, and squeezed billions in debt service from the poorest countries in Africa. Not to mention racking up a record, economically unsustainable trade deficit for the United States.

http://www.commondreams.org/views01/0109-04.htm

[August1991]

Before this thread gets highjacked into a bash-Clinton, bash-Bush slugfest, here are some interesting points from Greenspan's book:

Mr. Greenspan, who calls himself a "lifelong libertarian Republican," writes that he advised the White House to veto some bills to curb "out-of-control" spending while the Republicans controlled Congress. He says President Bush's failure to do so "was a major mistake." Republicans in Congress, he writes, "swapped principle for power. They ended up with neither. They deserved to lose."

...

He attributes the housing boom to the end of communism, which he says unleashed hundreds of millions of workers on global markets, putting downward pressure on wages and prices, and thus on long-term interest rates.

...

From serving under so many presidents, Mr. Greenspan concludes that there's something abnormal about anyone willing to do what it takes to get the job. Mr. Ford, he writes, "was as close to normal as you get in a president, but he was never elected." The Watergate tapes, he says, show Richard Nixon as "an extremely smart man who is sadly paranoid, misanthropic and cynical." He recalls telling someone who had accused Nixon of anti-Semitism that he "wasn't exclusively anti-Semitic. He was anti-Semitic, anti-Italian, anti-Greek, anti-Slovak. I don't know anybody he was pro."

...

On energy, he recommends more use of nuclear power, and he predicts efforts to reduce global warming with carbon caps or taxes will fail. Rising income inequality could undo "the cultural ties that bind our society" and even lead to "large-scale violence." The remedy, he says, is not higher taxes on the rich but improved education, which can be helped by paying math teachers more.

Mr. Greenspan returns repeatedly to the far-reaching importance of communism's collapse. He says it discredited central planning throughout the world and inspired China and later India to throw off socialist policies. He recalls meeting a former manager of a produce distribution center in China who says he once had to labor to allocate produce according to government edict; now the allocations are made by auction. "Now I don't have to get up at four a.m.," he quotes the manager as saying. "I can sleep in and let the market do my job for me." Mr. Greenspan recalls his amazement when an adviser to Russian President Vladimir Putin asks him to discuss Ayn Rand, the libertarian philosopher with whom Mr. Greenspan had been friends.

In coming years, as the globalization process winds down, he predicts inflation will become harder to contain. Recent increases in the price of imports from China and a rise in long-term interest rates suggest "the turn may be upon us sooner rather than later."

WSJ

I agree that the best solution to income inequality is not prohibitive taxes but paying more to math teachers. We may also find that the most significant event of the 20th century was not the defeat of fascism but the collapse of communism. Greenspan is also right to point out the effect of globalization and workers on real interest rates. He seems to think that this is a one-off event and this dividend has allowed us to avoid inflation. He may be right.

Lastly, he's right about the kind of people who manage to get into the White House, or any position of high political authority.

Greenspan has always thought outside the box.

Edited September 16, 2007 by August1991

[bush_cheney2004]

Before this thread gets highjacked into a bash-Clinton, bash-Bush slugfest, here are some interesting points from Greenspan's book

Ironic, since it seems that Mr. Greenspan has chosen to write a book that, in part, does exactly the same thing.

[jdobbin]

Before this thread gets highjacked into a bash-Clinton, bash-Bush slugfest, here are some interesting points from Greenspan's

Lastly, he's right about the kind of people who manage to get into the White House, or any position of high political authority.

Greenspan has always thought outside the box.

The bashing has been done by Greenspan and has been described in media accounts and excerpts as that.

The only bashing of Clinton has come from people who are diverting from what the former Fed chairman had to say about working with Bush. They also overlook what he had to about working with Clinton.

[jbg]

How the party that championed small government came to believe that deficits don't matter is a mystery.

I don't think there is a political party in Canada on the federal front that could get away with the deficits don't matter philosophy. It has become deeply ingrained in the Canadian psyche now.

I admire Greenspan greatly. That being said, he's not managing several wars. Bush is, and deficits are endemic in wartime. This is ingrained in Canada because of Mulroney's and Trudeau's racking up massive peacetime deficits. I'm sure King ran wartime deficits.

Hopefully Canada will begin to adopt a lower taxation model now that it has defeated its deficit. It is concerning that the last two governments went on a spending spree rather than keeping things at the rate of inflation.

That would be a triumph of hope over experience. Canada is a country in the great Tory tradition of noblesse oblige and big government, now wearing a modern label of social democracy.

[jdobbin]

I admire Greenspan greatly. That being said, he's not managing several wars. Bush is, and deficits are endemic in wartime. This is ingrained in Canada because of Mulroney's and Trudeau's racking up massive peacetime deficits. I'm sure King ran wartime deficits.

That would be a triumph of hope over experience. Canada is a country in the great Tory tradition of noblesse oblige and big government, now wearing a modern label of social democracy.

The wars you speak of could least many more years. I don't know if the American economy can take it. And if a president decides to continue running deficits, it looks like your children will be paying for it. The argument that a bigger credit line for a bigger country ignores the fact there are limits to even this type of borrowing.

Deficits for 40 years were considered the norm. Low taxation used to be the hallmark of many Canadian provinces and the national government. Deficits were defeated. I think Canada can go back to lower taxation combined with lower spending.

Edited September 17, 2007 by jdobbin

[bush_cheney2004]

The wars you speak of could least many more years. I don't know if the American economy can take it. And if a president decides to continue running deficits, it looks like your children will be paying for it. The argument that a bigger credit line for a bigger country ignores the fact there are limits to even this type of borrowing.

Or the French economy...or the Japanese economy (170% of GDP)....this is not only an American problem. Canada's "children" will also be paying off such debt. If there are limits, then such limits will be tested. Because we can....

Edited September 17, 2007 by bush_cheney2004

[Guest coot]

I find it hilarious that people are shocked that he stated the obvious: that the Iraq war was all about oil. Do rational people still believe otherwise?

[moderateamericain]

President Bush is an utter failure when it comes to Domestic fiscal policy. Congress holds the purse strings, yes, but it is the President who sets both Fiscal and Monetary policy (Along with the board of governors). The one good thing i have to say about Bill clinton was that he was an whiz with Fiscal policy.

[Higgly]

I find it hilarious that people are shocked that he stated the obvious: that the Iraq war was all about oil. Do rational people still believe otherwise?

One of the major investment banks - I wish I could remember which one, but I believe it was Morgan-Chase, studied the issue and concluded that the amount of money spent invading Iraq was greater than the value of the oil in the ground. Mind you oil prices have gone up since then.

In any case, Greenspan was recently quoted on CNN as saying that he thought the Iraq War was "essential".

Interesting to note that Greenspan is a major Ayn Rand fan. I've read all of Rand's books and come to the conclusion that if her philosophy were to prevail, the world would be in a constant state of war. It's fun to think we are superior - look at Conrad Black - but if someone is going to be superior, someone must be inferior, and there is little inclination in the human spirit to accept inferiority. Ergo, war.

Edited September 17, 2007 by Higgly

[Topaz]

I read O'Neil's book, and he said that when he went into talk to Bush, Paul did all the talking anf Bush just sat there and said nothing. When he was in meetings and when they were talking about going into Iraq , before 9/11 happened, they soon decided to NOT talk about the war in front of Paul because he didn't think it was a good idea. When later in his time , when he tried to make suggests to bush, he never listened so Paul decided it was time to leave. The US has trillions of $$$ missing and when the new gov't comes in I'm sure we'll hear all about the debt and where is all the money going for the war.

[Guest coot]

One of the major investment banks - I wish I could remember which one, but I believe it was Morgan-Chase, studied the issue and concluded that the amount of money spent invading Iraq was greater than the value of the oil in the ground. Mind you oil prices have gone up since then.

That's probably true. I think it's naive to think it was just about securing oil supplies, which in itself is probably a worthy goal (though not one I'd send my children to die for).

It was also about no-bid contracts and secret transactions of billions of disappearing dollars.

[August1991]

I find it hilarious that people are shocked that he stated the obvious: that the Iraq war was all about oil. Do rational people still believe otherwise?

Let's go and see what Greenspan actually said, including his clarification.

Greenspan, who was the country's top voice on monetary policy at the time Bush decided to go to war in Iraq, has refrained from extensive public comment on it until now, but he made the striking comment in a new memoir out today that "the Iraq War is largely about oil." In the interview, he clarified that sentence in his 531-page book, saying that while securing global oil supplies was "not the administration's motive," he had presented the White House with the case for why removing Hussein was important for the global economy.

"I was not saying that that's the administration's motive," Greenspan said in an interview Saturday, "I'm just saying that if somebody asked me, 'Are we fortunate in taking out Saddam?' I would say it was essential."

He said that in his discussions with President Bush and Vice President Cheney, "I have never heard them basically say, 'We've got to protect the oil supplies of the world,' but that would have been my motive." Greenspan said that he made his economic argument to White House officials and that one lower-level official, whom he declined to identify, told him, "Well, unfortunately, we can't talk about oil." Asked if he had made his point to Cheney specifically, Greenspan said yes, then added, "I talked to everybody about that."

Greenspan said he had backed Hussein's ouster, either through war or covert action. "I wasn't arguing for war per se," he said. But "to take [Hussein] out, in my judgment, it was something important for the West to do and essential, but I never saw Plan B" -- an alternative to war.

Washington Post

Saddam was a potential threat because his oil revenues - despite their supposed sequestration under the oil-for-food scheme - meant he had the means to be a threat. Robert Mugabe may be a dangerous dictator but he's no threat to the West. If Zimbabwe sat on several billion tonnes of crude, then Mugabe would probably be of interest to the West too.

Greenspan is also making the point that if OPEC were to decide tomorrow, for whatever reason, to stop selling oil to oil consuming countries, then the world economy would have a grave crisis on its hands. In Greenspan's view, "taking Saddam out" was essential to preventing such an eventuality. One could argue that "taking Saddam out" was essential to preventing many varied threats.

The West must stand up for its interests and way of life. One can quibble about how the West should do this but there's no doubt we must do it, and Greenspan seems to be endorsing that idea.

[Guest coot]

I think it's rather naive in a post-911 world to assume someone would not be a threat without tremendous oil revenue or influence. Nineteen guys with boxcutters made the western world soil its collective pants.

I agree that the West must do what it takes to maintain its interests. The case that Saddam was an imminent threat to those interests, however, has never been convincingly made. Not even close really.

[August1991]

I think it's rather naive in a post-911 world to assume someone would not be a threat without tremendous oil revenue or influence. Nineteen guys with boxcutters made the western world soil its collective pants.

If anyone of those 19 had had access to a nuclear device or chemical weapons, the devastation and effect would have gone well beyond changing one's underwear.

Canadians are generally in favour of strict gun control. The decision to remove Saddam Hussein can be considered in a similar light.

[Guest coot]

Canadians are generally in favour of strict gun control. The decision to remove Saddam Hussein can be considered in a similar light.

Are you talking about the thousands of U.S. weapons that have mysteriously gone missing in Iraq? Otherwise, I have no idea what you're talking about.

http://www.usatoday.com/news/world/iraq/20...g-weapons_x.htm