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Greenspan: US Can't Afford McCain's Tax Cuts


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Greenspan: Can't afford McCain tax cuts

 

GOP candidate has advocated spending offsets, but Democrats pounce

 

The Associated Press

updated 4:50 p.m. ET, Sat., Sept. 13, 2008

 

WASHINGTON - Alan Greenspan says the country can't afford tax cuts of the magnitude proposed by Republican presidential contender John McCain ? at least not without a corresponding reduction in government spending.

 

"Unless we cut spending, no," the former Federal Reserve chairman said Friday when asked McCain's proposed tax cuts, pegged in some estimates at $3.3 trillion.

 

"I'm not in favor of financing tax cuts with borrowed money," Greenspan said during an interview with Bloomberg Television. "I always have tied tax cuts to spending."

 

McCain has said that he would offset his proposed cuts ? including reducing the corporate tax rate and eliminating the Alternative Minimum Tax that has plagued middle-class families ? by ending congressional pork-barrel spending, unnecessary government programs and overhauling entitlement programs such as Medicare and Social Security.

 

Democrats pounced on Greenspan's comments, in part because McCain professed last year that he was weaker on economics than foreign affairs and was reading Greenspan's memoir, "The Age of Turbulence," to educate himself.

 

"Obviously he needs to go back to that book and study it some more," Sen. Claire McCaskill, D-Mo., said during a conference call arranged by the campaign of Democratic nominee Barack Obama.

 

McCaskill said eliminating congressional earmark spending ? estimated at $17 billion annually ? cannot offset McCain's proposed tax cuts.

 

"That's a huge amount of money, but it's not even a drop in the bucket to pay for $3.5 trillion in tax cuts," she said. "So, every time he throws up earmarks and he's asked how he's going to pay for it, he knows he's being disingenuous, he knows he's not being forthcoming."

 

McCain aides dispute numbers

McCain campaign officials dispute the $3.3 trillion figure, saying it assumes eliminating 2003 tax cuts made by the Bush administration and then cutting from that higher level. They say McCain is proposing tax cuts worth $600 billion from current levels.

 

"John McCain opposed President Bush's tax cuts in 2003, because they didn't include the necessary spending controls. Sen. McCain's proposed job-growing tax cuts are modest in comparison to his plans to slow the exploding growth of federal expenditures ? meaning that contrary to Chairman Greenspan's assertions, this relief isn't proposed on borrowed money," said McCain spokesman Tucker Bounds.

 

While McCain opposed the 2003 cuts and previous Bush administration tax cuts from 2001, he now says he would leave them intact. Obama has said he would repeal Bush tax cuts benefiting families making over $250,000 annually to pay for programs and provide middle-tax class relief.

 

Conservative summit miffed

Meanwhile, organizers of a conservative summit in Washington said McCain and his running mate, Alaska Gov. Sarah Palin, missed an opportunity by not addressing the gathering. Some 2,100 activists from 44 states, plus another 10,000 people who signed up to watch online, participated in the three-day Values Voter Summit.

 

On Saturday, McCain was less than 10 miles away, working in at his campaign headquarters in Arlington, Va. Palin was leaving Alaska and traveling to a rally in Reno, Nev. Last year, McCain and seven other GOP presidential candidates spoke at the summit.

 

"I think there is some disappointment that he's not here. I think there's greater disappointment that Palin is not here," said Tony Perkins, president of the Family Research Council, a key sponsor of the summit. "I think people would have liked to have heard from her."

 

Activists attending the summit were unanimous in their enthusiasm for Palin, including several who said their support for McCain was lukewarm before he selected her.

 

Gary Ward, pastor of the Rocky Point Church in Stephenville, Texas, said he supported former Arkansas Gov. Mike Huckabee for the GOP nomination but that his enthusiasm for McCain has been increased by his choice of Palin and his recent statement that he believes life begins at conception.

 

"That was absolutely the right answer," Ward said.

 

Elizabeth Kish, an administrative assistant from Gainsville, Fla., said she was put off by McCain's record on immigration and was considering voting for Libertarian Party candidate Bob Barr until Palin's selection.

 

"Once he chose Palin that was it for me," said Kish, who was wearing a "Pro-Life Pro-Palin" button and another button featuring pictures of Chief Justice John Roberts and Supreme Court Justice Samuel Alito under the slogan, "The Kind of Change I Believe In."

 

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I'm not a huge fan of Greenspan, but I agree 100% with this quote of his in the article: "I'm not in favor of financing tax cuts with borrowed money".

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Lehman and Merrill are gone. Word is that up to 1500 banks are on the verge of collapse.

 

Good times.

 

My company's hemorraging. By the way, Greenspan was all for the "creative mortgages" of the past several years so he's not without blame. "Sure, all borrowing is healthy!"

 

Stupid irresponsible greedy jackasses.

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Lehman and Merrill are gone. Word is that up to 1500 banks are on the verge of collapse.

 

Good times.

 

My company's hemorraging. By the way, Greenspan was all for the "creative mortgages" of the past several years so he's not without blame. "Sure, all borrowing is healthy!"

 

Stupid irresponsible greedy jackasses.

Exactly why I said I'm no real fan of his. He replaced the Dot Com Bubble with the Housing Bubble. Unfortunately there was no new 'bubble' to save us when the housing market collapsed. Now we have a banking crisis on top of a weak real-estate market. How nice. :banghead :banghead

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Greenspan: Can't afford McCain tax cuts

WASHINGTON - Alan Greenspan says the country can't afford tax cuts of the magnitude proposed by Republican presidential contender John McCain ? at least not without a corresponding reduction in government spending.

 

He promises that as well, so it is a non-starter as an anti-McCain piece.

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I've been saying for the last few years that for certain people, such as myself, the policies I'm interested in ar enot even being discussed. Part of this is because of Bush, Generally, Republicans were the samll government party, but after Bush no one talks about a balanced budget or reducing the size of the bureaucracy. It's all about tax cuts or about healthcare programs, but no one is saying, hey lets start a new healthcare program and we'll do so by getting rid of the Department of Homeland Security.

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That's fair. I agree with that. We need to balance the budget one way or the other while at the same time making sure we don't undermine economic recovery. I am pretty certain at this point that we're headed for an especially severe recession, perhaps even a depression. I don't think we should do anything that may make recovery more difficult. So forget any real tax increases, unless they're very specific and they are accompanied by larger tax cuts. I don't think it's a bad idea to increase taxes for the top 1 percent of income earners so long as you cut taxes for the bulk of Americans and make sure that the tax cuts are significant.

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That's fair. I agree with that. We need to balance the budget one way or the other while at the same time making sure we don't undermine economic recovery. I am pretty certain at this point that we're headed for an especially severe recession, perhaps even a depression. I don't think we should do anything that may make recovery more difficult. So forget any real tax increases, unless they're very specific and they are accompanied by larger tax cuts. I don't think it's a bad idea to increase taxes for the top 1 percent of income earners so long as you cut taxes for the bulk of Americans and make sure that the tax cuts are significant.

 

250K is too low and too arbitrary. If you make 250K and you live in Manhattan with 5 kids and a wife, you aren't exactly living a life of luxury. Numbers like that don't take into account cost of living by region.

 

Ideally, I think this government needs to really cut out wasteful spending, which is much more than just pork. We have entire cabinet level departments that should be reevaluated and x'ed.

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It is idiotic to cut spending in a recession or depression.

What happens when you can't borrow any more money to spend, or have no source to raise taxes on?

 

One of two things: 1) let us go into a severe recession or even depression or 2) you print more money and avoid a severe recession but deal with inflation. Cutting spending during a recessionary period will just make matters worse. That's like cutting consumer spending in a recessionary period.

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It is idiotic to cut spending in a recession or depression.

What happens when you can't borrow any more money to spend, or have no source to raise taxes on?

 

One of two things: 1) let us go into a severe recession or even depression or 2) you print more money and avoid a severe recession but deal with inflation. Cutting spending during a recessionary period will just make matters worse. That's like cutting consumer spending in a recessionary period.

You would have to deal with severe hyperinflation which is perhaps least favorable on my list of possible outcomes. Look at the situation in Zimbabwe. A loaf of bread will cost you $5 million.

 

This is not a problem you can spend your way out of, despite what Barack is telling you.

 

I don't think Barack is saying that, and it's not what I said. It's a question of picking your poison. None of the options are attractive. I get that. But you have to make a choice about which option you think is 1) the least destructive to the economy and 2) you're able to manage better so you can get out of it. I think I prefer hyperinflation over a great depression. I'd rather not have either, but I think that's where we're headed.

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Fundamental by certain schools that I don't agree with.

 

Hoover and Roosevelt tried increased spending and it failed utterly to sustain the economy. In fact, it prolonged the agony. Similar trends were observed fairly recently in Japan in response to their respective crisis.

 

Just because it failed to sustain the economy doesn't make it worse than not increasing spending. The credit crisis in the late 1920s going into the 1930s is fundamentally what brought the economy into a depression. There was probably only so much the government could have done to reduce the impact of the recession. In any case, government spending in the 1930s is what kept mouths fed and people employed. Without it, you would have had even deeper poverty. I think they did the right thing.

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Fundamental by certain schools that I don't agree with.

 

Hoover and Roosevelt tried increased spending and it failed utterly to sustain the economy. In fact, it prolonged the agony. Similar trends were observed fairly recently in Japan in response to their respective crisis.

 

Just because it failed to sustain the economy doesn't make it worse than not increasing spending. The credit crisis in the late 1920s going into the 1930s is fundamentally what brought the economy into a depression. There was probably only so much the government could have done to reduce the impact of the recession. In any case, government spending in the 1930s is what kept mouths fed and people employed. Without it, you would have had even deeper poverty. I think they did the right thing.

Putting people back to work seemed to do the trick. That way they were able to put that money into the economy.

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