Greenspan Says Recession Cheap Price to Fix Fiscal Policy

[Buster]

http://mobile.bloomberg.com/news/201...al-policy.html

Allowing taxes to rise would be a small price to pay to get U.S. lawmakers to accept spending cuts on entitlement programs, even if it leads to a “moderate recession,” former Federal Reserve Chairman Alan Greenspan said today during an interview on Bloomberg Television and also at a panel discussion in Washington.

“Even if we have to pay the cost of a significant rise in taxes to get a significant slowing, and then decline, in social benefits that is a very cheap price,” Greenspan said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “A large increase in taxes required to fund what is currently in the books is going to cause a recession,” he said. “If we can get away with that as the only cost to this whole problem, I think that’s a pretty good deal.”

Greenspan, 86, earlier today joined Paul Volcker, also a former Fed chairman, for a discussion on fiscal policy sponsored by the nonpartisan Peter G. Peterson Foundation at the Newseum in Washington. They both said that if policy makers are unable to reach a compromise to address spending cuts and tax increases, markets will react negatively.

“This is a very dangerous situation,” Greenspan said today at the event. “Markets may respond negatively before we even notice it, and that’s going to cause a huge problem.”

Greenspan said it would be a mistake to think that the U.S. is going to fix its “unstoppable” spending “without pain.”

Expansion in the U.S. faces headwinds from a slowing global economy and the risk Congress won’t reach a deal to avoid the so-called fiscal cliff, more than $600 billion of tax increases and federal spending cuts scheduled to kick in automatically in January. The drop in spending and rise in taxes could push the country back into recession, according to the nonpartisan Congressional Budget Office.

Gross domestic product, the value of all goods and services produced in the U.S., rose at a 2 percent annual rate in the third quarter after climbing 1.3 percent in the previous three months, the Commerce Department said Oct. 26.

Volcker, 85, said that the U.S. tax system is “broken” and “it’s going to take some time” to reach a consensus among policy makers about how to redesign the system.

“It’s not going to be January 2013, it’s going to be 2014, 2015 before that gets put into place,” said Volcker during the discussion, which was moderated by Peter Peterson, chairman of the foundation.

Volcker served as Fed chairman from 1979 to 1987 and Greenspan served in the role from 1987 until 2006.

To contact the reporters on this story: Elizabeth Dexheimer in Washington at edexheimer@bloomberg.net; Betty Liu in New York at bliu17@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

[AlbanyJet]

Federal Reserve Chairman Ben Bernanke gave a speech in the City this afternoon. The concensus from the CNBC talking heads/experts was that we're headed to an economic recession. How bad, we'll soon find out.

[DDNYjets]

We are going back into a recession.

Who gets the blame? Bush or the House Reps?

[cedk]

Recession, unemployment and the economy in general are insignificant issues while the left is in power. Just no biggie at all . Just like the Afghan, Iraq wars became unimportant while the left is in control same with the economy.
everything is cool now .

[HessStation]

Originally Posted by DDNYjets

We are going back into a recession.

Who gets the blame? Bush or the House Reps?

It's depressing. But QFT.

[HessStation]

Originally Posted by cedk

Recession, unemployment and the economy in general are insignificant issues while the left is in power. Just no biggie at all . Just like the Afghan, Iraq wars became unimportant while the left is in control same with the economy.
everything is cool now .

Mainstream media laughs in your face and points at you silly 49%.

[Soberphobia]

Greenspan doesn't have a whole lot of credibility, given he said in 2005 something like: "there is no housing bubble" and also given he also oversaw the largest rise in debt in modern history. Having said that in the OP he's probably more right than wrong.

[DDNYjets]

Originally Posted by Soberphobia

Greenspan doesn't have a whole lot of credibility, given he said in 2005 something like: "there is no housing bubble" and also given he also oversaw the largest rise in debt in modern history. Having said that in the OP he's probably more right than wrong.

I believe Barry holds that honor.

[Soberphobia]

Originally Posted by DDNYjets

I believe Barry holds that honor.

In % terms its actually Reagan (non-wartime), but yeah I'm talking about private debt. Greenspan kept interest rates too low for too long, hence the debt bubble/housing bubble etc.

[AlbanyJet]

Originally Posted by cedk

Recession, unemployment and the economy in general are insignificant issues while the left is in power. Just no biggie at all.

Sadly, you are correct.

I was watching the NY1 9-10 PM call in program last night. Lots of suffering in NYC. Significant numbers of NYers don't even have enough food in their homes to eat and there's no relief in sight. Not Sandy related.

All extended Unemployment insurance ends 12/30/2012. 2013 is going to be rough.

But they voted for Obama.

[Frequent Flyer]

Originally Posted by AlbanyJet

Sadly, you are correct.

I was watching the NY1 9-10 PM call in program last night. Lots of suffering in NYC. Significant numbers of NYers don't even have enough food in their homes to eat and there's no relief in sight. Not Sandy related.

All extended Unemployment insurance ends 12/30/2012. 2013 is going to be rough.

But they voted for Obama.

And no EIC checks (absurdly called tax refunds when they are no such thing) either.

http://www.suntimes.com/business/sav...ns-to-you.html

Such cruel irony that the aggressors in class warfare would become their own collateral damage. I bet most of those lowlifes spent the money already.

Oh well.