I'm getting tired of Alan Greenspan. First, the former Federal Reserve chairman blamed an allegedly unregulated free market for the housing and financial debacle. Now he favors repealing the Bush-era tax cuts.
This has a certain sad irony. Recall that Greenspan once was an associate of Ayn Rand, the philosophical novelist who provided a moral defense of the free market, or as she put it, the separation of state and economy.
Greenspan even contributed three essays to Rand's book "Capitalism: The Unknown Ideal" — one for the gold standard, one against antitrust laws, and one against government consumer protection.
It was slightly bizarre when Greenspan accepted President Reagan's appointment to run the Fed — maybe he thought that as long as the Fed exists, better someone like him run it rather than one who really believes government should centrally plan money and banking.
Be that as it may, Greenspan went on to pursue an easy-money policy in the early 2000s that is widely credited, along with the government's easy-mortgage policy, for the boom and bust that followed.
During a congressional hearing two years ago, Greenspan shocked me by blaming the free market — not Fed and housing policies — for the financial collapse. As The New York Times gleefully reported, "(A) humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets."
He said he favored regulation of big banks, as if the banking industry weren't already a heavily regulated cartel run for the benefit of bankers. Bush-era deregulation is a myth perpetrated by those who would have government control the economy.
We libertarians were distressed by Greenspan's apparent abandonment of his free-market philosophy and his neglect of the government's decisive role in the crisis.
But at least he took a shot at the new controls Congress coveted: "Whatever regulatory changes are made, they will pale in comparison to the change already evident. ... (M)arkets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime."
But now Greenspan, going beyond what even President Obama favors, calls on Congress to let the 2001 and 2003 Bush tax cuts expire — not just for upper-income people but for everyone. "I'm in favor of tax cuts, but not with borrowed money. Our choices right now are not between good and better; they're between bad and worse. The problem we now face is the most extraordinary financial crisis that I have ever seen or read about," he told the Times.
He says he supported the 2001 cuts because of pending budget surpluses, but now that huge deficits loom, new revenues are needed.
Why? Brian Riedl of the Heritage Foundation says that since the cuts, "The rich are now shouldering even more of the income tax burden." The deficit has grown not because we are undertaxed but because government overspends. "Tax revenues are above the historical average, even after the tax cuts," Riedl writes.
Given the stagnant economy, this is the worst possible time for tax increases. (Is there ever a good time?) Taking money out of the economy will stifle investment and recovery, and it's unlikely to raise substantial revenue, even if that were a good thing.
Finally, the stupidest thing said about tax cuts is the often-repeated claim that "they ought to be paid for." How absurd! Tax cuts merely let people keep money they rightfully own. It's government programs, not tax cuts, that must be paid for. The tax-hungry politicians' demand that cuts be "paid for" implies the federal budget isn't $3 trillion, but $15 trillion — the whole GDP — with anything mercifully left in our pockets being some form of government spending. How monstrous!
If cutting taxes leaves less money for government programs, the answer is simple: Ax the programs!
John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "Give Me a Break" and of "Myth, Lies, and Downright Stupidity." To find out more about John Stossel, visit his site at johnstossel.com.
16 comments from readers
Anyone in the private sector that spent like a congress critter would be in jail!
That single point of failure economic system design was a systemic mistake.
"It's the economies, stupid, not 'the' economy."
The phrase is 'United we stand.' Not 'United it stands.'
We don't build bridges that way(look at a suspension bridge cable), and we shouldn't be replacing economies and try to build 'a' economy that way, either.
Single point of failure is a lousy idea. OneSizeFitsAll doesn't. All our eggs in one basket is a lousy idea. Monopolists with guns are no less monopolists than monopolists without guns.
If 50 sets of state banking and lending regulations were still in place, there would be no 'Countrywide.' There might have been a 'StateWide', and a 'Bank of California', and there would not have been a spontaneous national alignment on a single social experiment. If one state had run amok with a flawed model, the other 49 would have easily absorbed their nonsense, and this crisis would never have made it past P8 of the local papers.
We need to transition back to 50 experiments running in parallel, not one all or nothing experiment running serially. We need to restore federalism, and back away from this new American Totalitarianism. It is a lousy way to build a complex system, like the economies.
"Finally, the stupidest thing said about tax cuts is the often-repeated claim that "they ought to be paid for." How absurd! Tax cuts merely let people keep money they rightfully own. It's government programs, not tax cuts, that must be paid for."
Even so-called Republican members of Congress are chanting this mantra about paying for tax cuts. The ridiculous lengths our power and cash-hungry legislators and the leech-like programs and people who depend on them will go to bleed those of us who produce have reached new heights. What will happen when the leeches finally manage to kill the host?
You see, whereas Rand lived her entire "pure capitalist" life in the ivory tower, Greenspan had to actually face the real world and wrestle with tough policy decisions. We can only speculate on how Rand's world view might have changed if she had to actually deal with reality.
Yes, government policy helped create the financial meltdown, but it was also created by greed in the private sector -- unleashed by deregulation of the financial sector (Dec. 1999). Private companies created loads of "financial innovations" to obscure risk and create huge profits. And yet you continue to advocate even less regulation of the financial markets? Get real.
Individual liberty and autonomy made this nation the envy of the world! Now collectivism, excused by socialistic and spiritualistic altruism - from the BFIWs and their Pope to the Earth-bitch-worshiping "scientific" mystics - threatens to fulfill the apocalyptic vision at the end of Rand's Atlas Shrugged!
If we are to regain our freedom and return to being a nation worthy of the title of "superpower", spiritualist economic fallacies and follies - from environmentalism to Keynesian economics - MUST be rejected and cast off, lest we sink into the abyss of a New Dark Age.
Lies like this will not sell freedom or smaller government
The largest fault of these pontificating blow-hards is that they think that none of their readers have IQ's in triple digits.