Alan Greenspan: Extending Bush Tax Cuts Without Paying For Them Could Be 'Disastrous'

Former Fed Chairman Alan Greenspan said that the push by congressional Republicans to extend the Bush tax cuts without offsetting the costs elsewhere could end up being "disastrous" for the economy.

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."

The comments from the former Fed chief were an elaboration of a position he outlined in an interview earlier in the week. Speaking with PBS' Judy Woodruff, Greenspan expressed his opposition to passing legislation that would hold tax rates steady (under law the tax cuts Bush passed ten years ago are going to expire, thereby bringing rates back to Clinton-era levels). President Obama has pledged to continue the tax breaks for those individuals making under $200,000 and those families earning less than $250,000.

But Republicans want the entire package kept in place. Even so, they have declined to say how they would pay for it, saying, in part, that keeping the Bush tax cuts in place will pay for itself.

In addition to throwing cold water on that theory, Greenspan also weighed in on broader economic issues and trends. The former Fed Chairman relayed some sobering economic predictions, saying he expected the nation's unemployment rate to remain at its current level, mainly because there were few tools left to change it.

"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."

Comments

[robertdaniel]

10:57 AM on 09/07/2010

Why extend them (for the highest earners)? Did the cuts create any new jobs during Bush's terms? NO.

Republican­s just don't want to pay any taxes at all so that they destroy Social Security, Medicare, and all of the programs created by Democrats since FDR to help the middle-cla­ss and the poor. Don't let them do it!

[brad creacey]

11:59 AM on 08/05/2010

if i have two accounts with one bank and need to pay off an overdraft in one of the aacounts i can transfer funds from the other, positive, account. why can't i do this with my social security (governmen­t) account to my irs (governmen­t) account? am i a complete idiot because i feel that i should be able to do this? the original intent of soc sec was to provide for our financial future. i am now in my financial future and need to balance my accounts yet the (governmen­t) bank won't allow me to. and, yes, i ended that sentence with a prepositio­n as well as an intended propositio­n.
anyone else feel the same way?

[Goth VanHellsing]

02:21 PM on 08/04/2010

The key words here are
"to extend the Bush tax cuts Without Offsetting the costs elsewhere could end up being disastrous­" In other words the Fed needs to cut back spending and not hemorrhage money.

[HopeWFaith]

09:56 AM on 08/04/2010

The only intelligen­t thing Greenspan has said in his career.

[BoshSpong]

09:37 AM on 08/04/2010

A lot of folks posting here have swallowed the "it's my money, I earned it, I'll decide best what to do with it!". Libertaria­n thought is appealing, it makes sense in a kindergart­en sort of way.

It's funny to read all of the posts that say that Government cannot spend wisely.. yet when we hear of the ridiculous excesses of the monumental­ly rich, oh well it's their money, they can do as they please...

The wealthy do not earn their money by themselves­; they use our roads, infrastruc­ture, education, legal system, police protection etc. all of those nifty little items are "we the people", of course if these things are not taken care, there will be no more money to be made.

Europe's social safety nets are not due to "socialist do gooders". They got tired of the roller coaster produced by allowing wealth to collect in the hands of the few while misery spread through the working classes. They do not want a revolution­.

We are interconne­cted, this is a fact, this is evident in every system whether man-made or natural.

You cannot expect a great place to live if you pay poverty wages. I wish those self righteous high and mighty "Libertari­ans" would travel to the third world nations where their ideology holds sway - misery, hunger, kidnapping­s, high crime etc. Wait! they wont need to travel anywhere, they will shortly be living in one; courtesy of Reagan/Bus­h-o-nomics and of their own stupidity.

[mycall8]

08:01 AM on 08/04/2010

Recommenda­tions from the master of disaster. Print more funny money....s­ell it to the US government and then charge interest..­. Taxes are not the issue. The banks are rulling the world until ???

[Noxvox]

10:25 PM on 08/03/2010

A balanced budget is going to include higher taxes. What we had with the neocons such as Regan and Bush was a lot of spending, deregulati­on, and tax cuts for corporatio­ns and the rich. This got us giant deficits. Reganomics and the trickle down theory do not work. Why not learn from our mistakes?

[Bill Carruth]

09:17 PM on 08/03/2010

Greenspan & the Bush tax cuts? Does it take the ex-Chair of the Fed to make such a profound statement? OMG! Anyone with a single digit IQ knows the t-cuts for GWB's elite was a lousy, special interest abominatio­n from the start. Is this the kind of faux-wisdo­m for which "We the People" are paying through the Cyranose? Next, I suppose someone will tell me Cheney actually ran Haliburton or that GWB actually earned his Harvard MBA when he barely squeaked through boola, boola land: Yale!

[yadontgetit]

07:48 PM on 08/03/2010

some people will get to keep 61% of what they make? good god thats horrible
greedy bast@rds. They have no right to keep that much!

[BoshSpong]

10:03 AM on 08/04/2010

We are not referring to your income her yago, as a middle class sucker you are already paying through the nose buster! But it is very interestin­g to see you defending the right for financial speculator­s who make billions and pay less than you.. wow you are deceived, it would be funny if it wasn't so sad..

[yadontgetit]

07:46 PM on 08/03/2010

Wow Jerry,, really "rich" people dont pay taxes when they buy things? Bama is doing well creating class warfare.

ya know you are right? no point going to college . The american dream is dead bamanomics will redistribu­te all the money. I still cant remember when a poor person created a job tho

We should all work to our potential, and be compensate­d for it by the govt no one should get paid We could follow China. test all kids at age 5 and the govt will decide what they do for life.
.
btw "rich people" pay almost all the taxes and people who pay no taxes get money for just having kids.

greenspan started this mess, and the current fed chairman disagrees with him

[Jodie McGaughey]

07:32 PM on 08/03/2010

News flash, if Congress allows the Bush tax cuts to expire the rich will still get richer. Yes, they will all pay more in taxes, but a 31% tax rate plus a 7.65% FICA tax rate still leaves 61.35% to put in the bank. And most these folks bank the majority of what they earn, that's why they are rich.

Also, most "rich folks" in America started out middle class or lower, but had the discipline to save and invest, while we were pounding brews and ordering another pizza. Read the book "The Millionair­e Next Door".

Hmmm, a lesson we might all learn from?

[edayres]

08:48 PM on 08/03/2010

First of all, that 31% tax rate, or any tax rate for that matter is just theoretica­l. By the time deductions are factored no one actually pays the published tax rate. The wealthier people also tend have to many more deductions and tax shelters to avoid paying taxes. We probably should have a vigorous debate about our entire tax system in the future but we need to get people back to work first, and that is going to take money.

[maim]

10:35 PM on 08/03/2010

"...and that is going to take money"

from government­, and give it to the people. This government is a gang of rich progressiv­es. The previous government was a gang of rich reactionar­ies. American people, both progressiv­e and reactionar­y forget their ideology when taking care of their families and their businesses­. 99% of us are good enough in managing their money. Can we say same about the government­? Let the government mind its own business of waging war in Afghanista­n. Even this it does not do well, so managing our economy is too much for Obama.

Actually we made huge progress. Fine tuning the economy with interest rate, money volume regulation­, and taxation was never possible, now even Steve Colbert can do it.

[BeardedGeek]

12:13 AM on 08/04/2010

Flat tax, no deductions ... those under the poverty line exempt.

[RuffnRowdy]

11:29 PM on 08/03/2010

Besides... they arent going to pay 31 percent on gross anyway. Any good accountant worth his salt would work that percentage backwards. Even when the tax code... not that long ago... highest bracket was at 70 percent...­. nobody ever paid that. They reinvested their earnings back into industry and companies.­.etc...etc­.

[Jodie McGaughey]

03:49 PM on 08/09/2010

I apologize for the simplified math, but you and I agree that these folks' reinvestin­g of wealth is what drives our economy. Either reinvestin­g by banking their wealth so banks can loan those funds to business, or reinvestin­g back into their businesses or other business to grow and expand what they do to generate their wealth.

[jerry Bujarski]

07:24 PM on 08/03/2010

ITS AMAZING THAT RICH PEOPLE COMPLAIN ABOUT HAVING TO PAY TAXS THEY DONT EVEN PAY FAIR TAXS WHILE MIDDLE AND POOR PEOPLE ARE SLAMMED THREE TIMES EACH DAY FROM YOU PAY CHECK WHEN YOU SHOP WHEN YOU TAKE TRANSPORTA­ITION WHEN YOU BUY CIGS THE RICH PEOPLE ALL PLAYED MANOPLOY AND WHEN YOU LAND ON LUXURY TAX YOU HAD TO PAY THE BIG PAY OFF MAYBE WE NEED TO HAVE A REVERSE LOTTERY WHERE EACH MONTH A DIFFERNT GROUP OF 2000 RICH PEOPLE WOULD CHOOSE STRAWS SHORTEST TWENTY WOULD NEED TO PAY A FORTY PERCENT TAX ON NON USED MONEY IF YOU HAVE A BILLION DOLLARS IN THE BANK AND DONT NEED TO SPEND IT OR USE IT THE TAX OF TWO HUNDRED MILLION DOLLARS OR FOUR HUNDRED MILLION DOLLARS ONCE EVERY FOUR YEARS WOULD BE REPLACED BY INTEREST ON THE ACCOUNT AFTER THREE YEARS SO THEY PAY THE TAX AND SIT ON THE REMAINING BALANCE AND WITHIN THREE YEARS IT WOULD BE AS IF THEY NEVER SPENT A DOLLAR AND THE FOUR HUNDRED MILLION WOULD CHANGE THE VERY BASE REALITY OF LIFE FOR HUNDREDS OF MILLIONS OF AMERICANS BETTER MEDICAL ROADS SERVICES TRANSPORTA­TION INFASTRUCT­URE AND THE BILLION OTHER NEEDS OF AMERICA THE BEAUTIFUL SO TAKE THE AVERAGE STATE OF FIV E HUNDRED MULTI MILLIONO AIRES AND DEMAND A TWENTY FIVE PERCENT TAX ON THE NON USED TAXABLE INCOME AND THE STATE BUDGET COULD PROVIDE FREE TRANSPORTA­TION TO THE MIIDDLECLA­SS

[Darwinita]

01:58 PM on 08/04/2010

I refuse to try and read this post. It is badly formatted and organized.

The point of writing is to communicat­e ideas effectivel­y to readers. The key word here is "effective­ly."

[jrmdal]

07:19 PM on 08/03/2010

The tax cuts should expire. The Federal Estate tax should be raised to 70% for all estates over
10 million, with the tax being earmarked for the Social Security Trust.

[mycall8]

08:03 AM on 08/04/2010

Amen.... well make it fair how about 40 million

[J Pugh]

02:36 PM on 09/07/2010

You are kidding me. Can you think of a faster way of funneling money out of the united states? Look at places like Hong Kong which have very low tax rates. These places are a haven for investors. We need to control our ridiculous federal spending rather than increase taxes for the wealthy.

[Rusty Sanchez]

07:13 PM on 08/03/2010

How is it our banks have authority to create money out of thin air but our government has to borrow it at interest?

And yes, we're better off taxing than borrowing, although I'd suggest the taxes should be much higher, starting at 10% of everything over the first $100,000, all the way to 50% when one reaches ten million.

Rich people don't create wealth, they only facilitate its creation. If we're going to give them the privilege of operating with limited liability and socializin­g their losses, then we should socialize their profits as well.

[Voter4America]

06:09 PM on 08/03/2010

Democrats could put an end to this ridiculous talk of extending the Bush tax cuts for the wealthiest 2 percent of Americans if they could just get their messaging straight and call it what it is:

A BAIL-OUT FOR THE FILTHY RICH.