Posted on 11/06/2003 9:34:43 AM PST by areafiftyone
WASHINGTON - Federal Reserve Chairman Alan Greenspan delivered an upbeat assessment of economic prospects, saying Thursday the odds "increasingly favor" a revival in job growth.
However, he warned about long-term threats posed by the soaring federal budget deficit. If that red ink is not brought under control by the time Baby Boomers start retiring, it could have "notable, destabilizing effects" on prospects for growth in the future, he said.
In the debate over how to fix the deficit problem, Greenspan sided with President Bush and the Republicans, who argue that government spending should be cut to deal with the deficit rather than raising taxes.
On the economy, Greenspan cited a number of favorable recent developments pointing to stronger economic growth and said that even the job market, which has continued to shed jobs this year, seems to be finally turning around.
"The odds ... increasingly favor a revival in job creation," Greenspan said in a speech to the Securities Industry Association. He cited such hopeful signs as the need of businesses to replace inventories, which have dropped to extremely low levels, given the strong buying spree consumers went on during the third quarter.
Low Risk of Inflation
The Federal Reserve has left a key short-term interest rate it controls at a 45-year low of 1 percent. Greenspan repeated on Thursday assurances that the central bank would not feel the need to quickly start raising interests rates at the first signs of economic growth.
Greenspan said that unlike earlier periods of recovery, inflationary pressures were still non-existent. "In these circumstances, monetary policy is able to be more patient," Greenspan said in remarks delivered by satellite to the securities conference in Boca Raton, Fla.
Greenspan noted that consumer inflation was running around 1 percent, such a low level that the central bank still believes that the remote possibility that the country could face a destabilizing bout of deflation, falling prices, outweighs the risks of higher inflation.
Greenspan said the situation was far different from past U.S. history in which, even after recessions, inflation remained at higher levels than the Fed wanted to see.
"As a consequence, with some risk to economic activity, monetary policy typically had to move aggressively in the uncertain early stages of past economic recoveries to ensure that inflation would be contained," Greenspan said.
The Fed chairman said the "relatively optimistic short-term outlook for the U.S. economy" was playing out against a growing concern in financial markets about the surging federal budget deficit.
The Need to Cut Spending
He said it was critical for Congress and the administration to address this problem. He again urged the reinstatement of budget rules that require any future tax increases to be offset by either spending cuts or increases in other taxes. He urged reinstatement of caps on the amount that discretionary government spending could rise in any year.
Greenspan said the nation's budget problems would become even more acute in just five years, when the first wave of Baby Boomers hits the age of 62, the time when about half of prospective Social Security beneficiaries choose to retire early even though it means taking reduced benefits.
The Danger of Democrat Tax Increases
While Democrats have blamed much of the budget woes on Bush's tax cuts, Greenspan cautioned against relying on increased taxes to reduce the deficit.
"Tax increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base," he said.
Greenspan said that it was difficult to estimate the magnitude of these risks but that they were of enough concern to warrant reducing the budget deficit "primarily, if not wholly, from outlay restraint."
What a joke! Gepfart was flipping out when the tax cuts were passed..claiming they were going to destroy America.
I remember seeing him ranting before Congress. What a phoney he is!
Remember Soros spelled backwards is soroS. Hopefully Putie will send several thousand retired/unemployed KGBers to flush Soros/soroS down in the liberal cesspool. This drugged out POS has harmed enough countries, it is past time for his to say goodnight and leave the world a far better place without him wasting oxygen.
You wicked ol' capitalist!!!!
Great cartoon.
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