Greenspan’s Economics Trips on His Naïve Politics, Again

J.D. Foster / July 16, 2010

Alan Greenspan recently gave a Bloomberg News interview with Judy Woodruff. His agenda was redemption. Hers was politics. She got what she wanted.

In the course of the interview, Greenspan acknowledged the economy was slowing, a more modest appraisal than that recently signaled by his former colleagues at the Fed who see a significant chance of a downturn and deflation. He also acknowledged that “this is not going to be a full-blown recovery.”

He noted one reason for the weak recovery is that “an ever-increasing part of the American economy in the last year or so has moved under the aegis of government” and that this “creates an attitude on the part of the business community which is retrenchment, and you can see it everywhere.”

He was also asked whether letting taxes go up would depress growth, to which he responded, “Yes, it probably will.”

So, in the face of a faltering recovery that the current Fed thinks could slide into contraction, and acknowledging that it would depress growth further, the old Maestro falls into the trap once again and says we should let the 2001/03 tax cuts lapse. (more…)