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January 31, 2001—Alan Greenspan, heretofore an aloof and
remote figure dispensing his pearls of economic wisdom before
the simpletons of Congress, did an abrupt about face Thursday,
endorsing a tax cut, if not the reckless tax cuts GB2 is
determined to enact.
The change obviously came a few weeks ago, when he emerged
from a meeting with George Bush with the blissful dazed look
men get coming out of a bordello. He started to walk past the
cameras, but George grabbed his arm and swung him back like an
errant steer. Comon back here, boy! What exactly
occurred there won't be known, but I suspect Bush led off with
a stick, "We are going to get this tax cut through, you
can get on the bus or get run over. No one is
indispensable." Here George's eyes would narrow and brow
furrow in that tough West Texas way. Then came the carrot.
Draping his arm over the untouchable potentate he waxed
magnanimous, "Al, what do you want? I'm the president now. I
want a tax cut. What in the world do you want?"
Judging from the Bushes, Powells (son becomes head of FCC),
Thurmonds (son becomes deputy US attorney), McConnells (wife
becomes labor secretary), we should expect the progeny or
relatives of Greenspan to be appointed to some position wildly
out of range of their experience and capabilities. Republicans
are good to their friends, and it's not that hard to become
one. Al was tamed.
Greenspan, whose previous acts were to raise the interest
rates twice to stop nonexistent inflation (carefully timed to
decimate my meager holdings), came out with the novel and
amazing thesis that the projected surpluses were so large that
a tax cut would be needed to reduce them: "problems" might
result from all that extra cash. Do what!!! How about
funding Social Security, paying off the national debt? These
worthy and steep aspirations are suddenly done deals.
Projecting these huge surpluses forward 10 years, Greenspan
worried about the government having to use all that cash to
buy up private assets. Uh huh. Greenspan is unparalleled at
saying all things to all people, but he is usually less
mendacious.
George Bush, unable to shift from campaigner to ruler, has
continued the tactics of lowering expectations, ruminating
about the coming recession as if he could inoculate himself
from the blame for it. As the president with the duty of
inspiring and looking forward, this is incredibly
irresponsible: he could provoke such events by talking
about them as inevitable. As long as he isn't blamed, that
doesn't matter. He now wants to cut taxes, not as a payoff to
rich contributors, but to stimulate the economy; a
notion that no one, including Greenspan, really believes. "Tax
cuts would be better than government spending," was his only
concession to this line of thought.
All these proposals rely on these huge continuing surpluses
(which due to Social Security under-funding, don't really
exist), which could end in a few months, if the possible
recession throws a lot of people out of work. In fact, the
very idea of assuming these unprecedented surpluses will last
a decade, let alone a few years, is idiotic. Ask anyone who
had Internet stocks. What goes up does come down. But George
wants to commit the entire surplus now to encourage the
economy not to tank, and pray that two or five years down the
road, the money will exist. He also wants to build a $1
trillion missile defense system that, uh, doesn't exist. And
put people's Social Security funds into the tumultuous stock
market, which Greenspan also seemed to endorse (luckily not
last March). Once upon a time Republicans embodied fiscal
responsibility.
Newsweek's entertaining financial editor Allan Sloan
is dismissive: "I think the idea of
stimulating the economy with the tax cut
Bush is proposing is baloney. For one thing,
getting rid of the estate tax isn't going
to stimulate anything except the net worths
of rich people. Second, the people who would
get the biggest cuts—probably me, since I'm
in a very high bracket—aren't going to run
out and spend. I'm probably going to save.
I think the long-term surplus forecasts are
very unreliable because all long-term federal budget numbers are unreliable,
and committing essentially all the projected
non-SS and non-Medicare surplus to a tax
cut is nuts. Bush's tax cut is backloaded,
and the 10-year period we're in comes just
before 2013, when the Social Security crunch
is scheduled to start. And if the Bushies
think that the economy is crap, then all
the surplus projections are wrong, because
they
depend on a good economy."
Twenty years ago, for those too young or condemned to
repetition, Ronald Reagan promised a massive tax cut, gigantic
rise in military spending, and a balancing of the budget. It
was a prescription for failure. Some people made a lot of
money, a trillion dollars of banks failed, half stolen by
organized crime (due to ending most federal regulation), and
Carter's projected $58 billion 1981 deficit ballooned to
$220–450 billion every year for 12 years of the Reagan/Bush
reign. The total deficit accumulated from George Washington's
time pentupled, the $3.7 trillion publicly held debt*
remaining means 14 cents of every tax dollar goes to pay
interest on this debt; down the tubes
forever.
This Bush wants to do it again.
The inexplicably durable Castro weighed in with his
considered opinion, guaranteed to earn him a division of
airborne troops somewhere down the road: "I hope he is not as
stupid as he seems." The White House had no comment.
*There is also another $~1.7 trillion of
government debt, mostly Social Security trust funds, also
increasing. Sloan expounded, "A point I keep on making, which
is totally ignored by everyone, was that during the campaign,
both the Gore and Bush budget proposals projected an increase
in total debt even though the publicly held national debt was
projected to go down a ton in Gore's numbers, half a ton in
Bush's." |
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