Greenspan on the Two Americas
Appearing on Meet the Press this weekend, Alan Greenspan, the former head of the Federal Reserve, sounded an awful lot like John Edwards for a central banker with a strong libertarian streak:
Our problem, basically, is that we have a very distorted economy in the sense that there has been a significant recovery in a limited area of the economy amongst high-income individuals who have just had $800 billion added to their 401(k)s and are spending it and are carrying what consumption there is. Large banks, who are doing much better, and large corporations, whom you point out and the — and everyone’s pointing out, are in excellent shape.
The rest of the economy, small business, small banks, and a very significant amount of the labor force, which is in tragic unemployment, long-term unemployment, that is pulling the economy apart. The average of those two is what we are looking at, but they are fundamentally two separate types of economy.
Greenspan also argued for extending the Bush tax cuts for the highest-income families as well as the middle class, noting that the rich are the only ones spending, so best not to discourage them from doing so. That said, Greenspan said that eventually the Bush tax cuts should sunset. “I’m very much in favor of tax cuts, but not with borrowed money.” he argued. “And the problem that we’ve gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day, that proves disastrous.”
Additionally, he said he believed that very high unemployment will stick around for a long time. “I would say that there’s nothing out there that I can see which will alter the trend or the level of unemployment in this context,” he noted.