Alan Greenspan is on Bloomberg talking to Betty Liu about the economy and the fiscal cliff in Obama’s second term.
The former Fed Chairman is just as worried about the issue as everyone else on the Street, and he doesn’t really think the election changes much (from Bloomberg):
I think it’s a very dangerous situation largely because presumption we can resolve this issue without physical pain, spiritual pain or any sort of economic pain whatsoever…. no matter how we resolve it there are negative consequences. I’m concerned the election hasn’t really changed the balance of what’s going on and I think it will come down to the very last minute before any action is taken.
A down-to-the-wire resolution is really the last thing the market wants (see the debt ceiling debate of summer 2011), and knowing that, Greenspan says that he’d like to see Congress start with Simpson-Bowels and work from there (because there’s more to do).
That, however, requires politicians to cooperate and “recognise that the national interest requires that in a democratic society you can have differences but if you want to live in the same economic location you have to come to an agreement,” said Greenspan.
It also requires politicians from both sides of the aisle to be honest about what the problem here is. Greenspan put it very succinctly as a “social benefits to persons problem” which is taking up 15% of GDP.
We’ve heard the before… entitlement spending. No two words getting fingers pointing faster in Washington, but Greenspan squashes that.
Remember that this expansion going on since the early 1960s has been occurring more under Republican administrations than Democratic administrations so it’s not a question of Democrats vs. Republicans.
There, that’s settled.
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