Greenspan Gets Even More Explicit

Greenspan elaborated further on his opinion regarding the deficit during continued testimony on Capitol Hill today. I suppose that he wanted to make it crystal clear to those who didn’t read my interpretation of his remarks yesterday that he is on the side of the tax-cutting Republicans in Washington:

“In addressing this budget issue, it is crucially important that we try to find, wherever we can, reductions in outlays before adverting to the question of revenues to fill in the gap.”

“I am in favor, as I’ve indicated in the past, for continuing the tax cuts that are in dispute at this particular stage, but I would argue strenuously that [tax cuts] should be taken out on the expenditure side.”

“We’re going to have to re-look at some of the entitlement spending outlays. I think we have constructed a good deal of the benefits structure over the last quarter of a century without a real firm look at whether or not the real resources were there to meet those benefits.”

I think that he is being utterly disingenuous in suggesting that the deficit can be balanced through spending cuts alone, while failing to mention how severe those spending cuts would have to be. In addition, while he’s correct that there are serious long-run actuarial imbalances in Social Security and Medicare benefits, his statement is clearly intended to support those who think the imbalances should be fixed by cutting social benefits.

There’s no economic research, certainly none at the Fed, that objectively supports Greenspan’s statements. Rather, they reflect Greenspan’s personal opinion, as he stated at the outset of his testimony. However, they also signal that he will be completely partisan on these issues – and that he won’t be shy about it.