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Nobody likes the truth



Published: Fri, April 29, 2005 @ 12:00 a.m.



St. Louis Post-Dispatch: Federal Reserve Chairman Alan Greenspan is a Republican conservative from the old school. He likes low taxes and isn't too concerned if the social safety net develops some large holes.

You'd think that GOP leaders in Congress would treat a fellow like that as a soul-mate. You'd be wrong.

Greenspan also has a habit of speaking unpleasant truths that Congress would rather not hear. He was at it again last week, noting that massive federal deficits may some day throw the country into an economic tailspin.

Or, as he put it, "The federal budget is on an unsustainable path, in which large deficits result in rising interest rates and ever-growing interest payments that augment deficits in future years."

That deficit snowball will grow bigger and bigger as a share of gross domestic product as the boomers retire. "Unless that trend is reversed, at some point these deficits would cause the economy to stagnate or worse," he said.

Avoiding the bill

Statements like that are anathema to the tax-cut-and-spend crowd now running Washington. These folks think the bill for their irresponsibility will never come due. After all, Bush and the GOP-controlled Congress created this year's $427 billion sea of red ink by cutting taxes (mainly for the wealthy), while also boosting spending and launching our $200 billion misadventure in Iraq. The recession of 2001 played a role, but it took foolishness in Washington to turn record surpluses into record debt.

In his 17 years running the Fed, Greenspan has done a masterful job with monetary policy. But he's made a few mistakes, and one was a whopper. In 2001 -- when America was still running a big budget surplus -- he told Congress it was OK to cut taxes. He hedged his advice by recommending triggers that would have halted tax cuts as the surpluses evaporated.

But he should have known that he was not speaking to old-fashioned fiscal conservatives such as himself. He was addressing a Congress that runs on ideology and understands politics better than economics. Congressmen took the Fed chief's words as permission to party.

Greenspan deserves a dollop of blame for mountainous mess he now complains about.




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