I'm getting tired of Alan Greenspan. First, the former Federal Reserve chairman blamed an allegedly unregulated free market for the housing and financial debacle. Now he favors repealing the Bush-era tax cuts.
This has a certain sad irony. Recall that Greenspan once was an associate of Ayn Rand, the philosophical novelist who provided a moral defense of the free market, or as she put it, the separation of state and economy. Greenspan even contributed three essays to Rand's book "Capitalism: The Unknown Ideal" — one for the gold standard, one against antitrust laws, and one against government consumer protection.
It was slightly bizarre when Greenspan accepted President Reagan's appointment to run the Fed — maybe he thought that as long as the Fed exists, better someone like him run it rather than one who really believes government should centrally plan money and banking. Be that as it may, Greenspan went on to pursue an easy-money policy in the early 2000s that is widely credited, along with the government's easy-mortgage policy, for the boom and bust that followed.
During a congressional hearing two years ago, Greenspan shocked me by blaming the free market — not Fed and housing policies — for the financial collapse. As The New York Times gleefully reported, "(A) humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets."
He said he favored regulation of big banks, as if the banking industry weren't already a heavily regulated cartel run for the benefit of bankers. Bush-era deregulation is a myth perpetrated by those who would have government control the economy.
We libertarians were distressed by Greenspan's apparent abandonment of his free-market philosophy and his neglect of the government's decisive role in the crisis.
But at least he took a shot at the new controls Congress coveted: "Whatever regulatory changes are made, they will pale in comparison to the change already evident.
... (M)arkets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime."
But now Greenspan, going beyond what even President Obama favors, calls on Congress to let the 2001 and 2003 Bush tax cuts expire — not just for upper-income people but for everyone. "I'm in favor of tax cuts, but not with borrowed money. Our choices right now are not between good and better; they're between bad and worse. The problem we now face is the most extraordinary financial crisis that I have ever seen or read about," he told the Times.
He says he supported the 2001 cuts because of pending budget surpluses, but now that huge deficits loom, new revenues are needed.
Why? Brian Riedl of the Heritage Foundation says that since the cuts, "The rich are now shouldering even more of the income tax burden." The deficit has grown not because we are undertaxed but because government overspends. "Tax revenues are above the historical average, even after the tax cuts," Riedl writes.
Given the stagnant economy, this is the worst possible time for tax increases. (Is there ever a good time?) Taking money out of the economy will stifle investment and recovery, and it's unlikely to raise substantial revenue, even if that were a good thing.
Finally, the stupidest thing said about tax cuts is the often-repeated claim that "they ought to be paid for." How absurd! Tax cuts merely let people keep money they rightfully own. It's government programs, not tax cuts, that must be paid for. The tax-hungry politicians' demand that cuts be "paid for" implies the federal budget isn't $3 trillion, but $15 trillion — the whole GDP — with anything mercifully left in our pockets being some form of government spending. How monstrous!
If cutting taxes leaves less money for government programs, the answer is simple: Ax the programs!
John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "Give Me a Break" and of "Myth, Lies, and Downright Stupidity." To find out more about John Stossel, visit his site at johnstossel.com. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
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Greenspan is the perfect example of someone who sells out his personal convictions once in government: Government power corrupts; absolute government power corrupts absolutely.
Comment: #1
Posted by: Jaime Gracia
Wed Aug 11, 2010 9:49 AM
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Four Deformations of the Apocalypse
By DAVID STOCKMAN, President Reagan's first director of the Office of Management and Budget
IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation's public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That's a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation's wealthiest taxpayers be spared even a three-percentage-point rate increase.
More fundamentally, Mr. McConnell's stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.
This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.
Comment: #2
Posted by: rodriguez48
Fri Aug 13, 2010 12:28 AM
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@rodriguez48, how about posting something original rather than just cutting and pasting an article? But the article says it all, Stockman just draws the wrong conclusions. It's not for lack of revenue that we are in this situation, it's the spending. And Republicans are just as much to blame as Democrats. Spending under the Bush adminstraton was absolutely appalling. But tax cuts end up generating more revenue than tax increases beacause they spur economic growth - something sorely needed at the moment - leading to increased tax revenues from additional workers in the system.
Comment: #3
Posted by: Rob Billeaud
Fri Aug 13, 2010 10:02 AM
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Greenspan is merely covering his butt and that of the Federal Reserve System. The 12 Fed banks collude as one single entity to set market rates. In doing so, each hides from responsibility among the collective. If, instead, each Fed bank were a private, competitive, independent entity, competing against the others, it's likely some amongst them would have seen the credit and housing bubbles, and would have set their individual rates accordingly. None would have listened to Greenspan.
Who says there has to be ONE fed rate? Congress should resume its authority to coin money. Striking down the Federal Reserve Act, we can replace it with a dozen slots to which banks can bid for temporary direct access to Federal Funds. The Treasury will be the auctioneer. This is a better system than reverting to the gold standard, because it is not arbitrary, nor is it subject to the non-financial inconsistencies of the marketplace, as gold is.
Comment: #4
Posted by: Gregg Mrinelli
Fri Aug 13, 2010 6:52 PM
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That's Marinelli. :)
Comment: #5
Posted by: Gregg Mrinelli
Fri Aug 13, 2010 6:53 PM
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Sounds like John is presenting a circular argument in which he ends up calling himself stupid for having the same position as Greenspan. Greenspan's position is word for word the same as John's. "If cutting taxes leaves less money for government programs, the answer is simple: Ax the programs!", or, in other words, pay for it. Greenspan has said that not doing so would be disasterous.
Lets be clear what "answer" as used by John means, according to Webster:
1. The solution, as to a problem
2. Correct reply
Therefore, what John is saying, which I completely agree with, "If cutting taxes leaves less money for government programs" (the problem), then the "solution" (definition one), and the "correct reply" (definition two) is to AX THE PROGRAMS. That is my position, that is Greenspan's position, and apparently John's position. John calls such people, those who advocate paying for the tax cuts, "stupid." So, a reasonable person must conclude that John thinks himself stupid. But, I wouldn't go that far. John is not stupid, just this article is.
Remember, we are not in a classroom debating taxation theory in the abstract. In theory, any good Libertarian would be for tax reductions and smaller government. We are talking about specific tax cuts in a specific economy. There are circumstances in which taxes should be cut without the necessity of adjusting spending, when doing so makes sound economic sense, is fair in its distribution, and doesn't impose on the liberty of others. The Bush Tax cuts is not one of them.
It would be disastrous and irresponsible to force the youth of America to pay for the economic crimes of their parent's generation. Doing so violates rule one of being a Libertarian by effectively taking away some of their liberty. Making our children indenture servants for our generations personal gain should be seen as a shameful and cowardly crime against the innocent and the defenseless. Doing so may not bother John. Perhaps, he secretly says to himself, "F___ them, there aren't my problem." I don't think that's what Ayn Rand stood for: Capitalism without honor. For me, it makes me sick to my stomach when I think that our children are being forced into slavery by greedy parents who, metaphorically, bought too big a house and now have no problem leaving the mortgage to their progeny.
Sincerely,
A Real Libertarian.
Comment: #6
Posted by: Herbert Marshall
Sat Aug 14, 2010 12:35 PM
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Mr. Marshall, I believe the point you are missing in John's article is that tax cuts are NOT a government program to be paid for. The idea being, if you don't have the money to pay for you projects, you cut back on your projects rather than increase taxes.
Comment: #7
Posted by: Jason
Mon Aug 16, 2010 5:12 AM
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The theory of having to "pay for" tax cuts implies that the money to cover the loss of income must come from somewhere else, but who says that money needs to be spent in the first place? The government seems to feel it is the responsibility of the tax payer to fund whatever programs the government feels like implementing. Instead, the government should only be collecting enough money to cover the programs the taxpayers ask for. If the taxpayers cannot or will not provide enough funds, the government simply provides less benefits. There is no minimum amount of money the government must collect. The current budget should not DRIVE how much money MUST be collected in taxes. No, the current budget should REFLECT what HAS been collected. The fact that the government borrows money from foreign debtors to fund programs few are asking for is the issue here. The attitude that those programs are absolutely necessary, and that they must be paid for somehow is absurd. When you (as an individual citizen) plan how much money you will spend over the course of a year, is that amount dependent on how much stuff you want to buy, or how much money you have to spend? The government should work in the same way.
Comment: #8
Posted by: Nathan H.
Mon Aug 16, 2010 1:18 PM
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