Greenspan Slams Bush's Fiscal Policy, Several Years Too Late
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This post, written by Ian Welsh, originally appeared on FireDogLake
So Alan Greenspan has a new book coming out on Monday. And it says nasty things about the Bush administration. Welcome to the club Alan - the club of Bush enablers who write books once they aren't in power, in a pathetic attempt to pretend they weren't culpable in Bush's mess. But back when it mattered, back when you were in charge of the Fed, when you were lionized as the Maestro... oh, back then, when you could have actually, I don't know, oh, done something concrete to oppose Bush's policies, did you? No, no you didn't.
Though Mr. Greenspan does not admit he made a mistake, he shows remorse about how Republicans jumped on his endorsement of the 2001 tax cuts to push through unconditional cuts without any safeguards against surprises. He recounts how Mr. Rubin and Senator Kent Conrad, Democrat of North Dakota, begged him to hold off on an endorsement because of how it would be perceived.
"It turned out that Conrad and Rubin were right," he acknowledges glumly. He says Republican leaders in Congress made a grievous error in spending whatever it took to ensure a permanent Republican majority...
...Today, Mr. Greenspan is indignant and chagrined about his role in the Bush tax cuts. "I'd have given the same testimony if Al Gore had been president," he writes, complaining that his words had been distorted by supporters and opponents of the cuts.
How precious is that. Take a look at the top chart - has the government ever reduced spending in recent history? Greenspan can't claim economic illiteracy. He knew that. Yet he shilled for tax cuts anyway.
In fact, according to a 2001 story he made the endorsement after he knew what the details of the cut were and the amounts of it. We are supposed to believe the Maestro couldn't do the math?
In testimony to the Senate Budget Committee, Greenspan declined to comment on President Bush's $1.6 trillion, 10-year tax cut plan, saying a decision on the size of a cut was best left up to Congress and the political process. But the Fed chairman's backing of tax cuts as economically sound likely will provide a boost to the new administration's proposals.
And the tax cuts made a difference. As Krugman noted:
Why, then, do we face the prospect of huge deficits as far as the eye can see? Part of the answer is the surge in defense and homeland security spending. The main reason for deficits, however, is that revenues have plunged. Federal tax receipts as a share of national income are now at their lowest level since 1950.
Of course, most people don't feel that their taxes have fallen sharply. And they're right: taxes that fall mainly on middle-income Americans, like the payroll tax, are still near historic highs. The decline in revenue has come almost entirely from taxes that are mostly paid by the richest 5 percent of families: the personal income tax and the corporate profits tax. These taxes combined now take a smaller share of national income than in any year since World War II.