posted on February 11, 2003 09:30:42 PM new
Though it's always a concern at an advanced age, Greenspan reaffirms that he's still in control of his mental faculties.
posted on February 11, 2003 09:48:49 PM newGreenspan Throws Cold Water on Bush Tax Plan
Reuters
Alan Greenspan challenged the administration's contention that big budget deficits pose little danger.
By EDMUND L. ANDREWS
ASHINGTON, Feb. 11 — Alan Greenspan, the Federal Reserve chairman, today rebutted many of President Bush's arguments in favor of big new tax cuts, saying that the economy probably does not need any short-term stimulus and warning that budget deficits could spiral out of control.
Mr. Greenspan did not attack the specifics of Mr. Bush's $674 billion tax-cutting package, but he cast doubt on the need for a stimulus proposal in the first place.
He also disagreed with the Bush argument that rising budget deficits have little link to higher interest rates. And he pointedly took issue with the administration's argument that the best way to balance the budget is by promoting faster growth.
"I am not one of those who is convinced that stimulus is desirable policy at this point," he told lawmakers at a hearing of the Senate Committee on Banking, Housing and Urban Affairs. "My own judgment is that fiscal stimulus is premature."
Because of Mr. Greenspan's enormous stature as a spokesman on economic issues, his comments today were a serious blow to the Bush administration. At the same time, the president met with some lawmakers at the White House to press his proposal.
In a cautious assessment of the economy, Mr. Greenspan said the biggest obstacle to faster growth was uncertainty about a likely war with Iraq. Though expressing optimism that the economy would strengthen once those uncertainties disappeared, he suggested that the Fed would not raise interest rates any time soon.
Two years ago, Mr. Greenspan provided crucial support for Mr. Bush's first round of tax cuts. That support helped Republicans win over wavering Democrats and push through the tax cuts even though Democrats had a slim majority in the Senate at that time.
Administration officials and most Republican lawmakers tried to put the best face possible on Mr. Greenspan's testimony, emphasizing that he had reiterated his support for eliminating the so-called double taxation of dividends.
But one Republican senator angrily accused Mr. Greenspan of surreptitiously trying to sink the Bush plan and suggested that he resign.
"You have been in this position for a long time, some would say too long," said Senator Jim Bunning, Republican of Kentucky and a longtime critic of Mr. Greenspan. "No president should try to set monetary policy. But the Fed chairman should not try to make fiscal policy. That's not your job."
Democrats immediately pounced on Mr. Greenspan's remarks to step up their attack on Mr. Bush's tax plan.
"I think Alan Greenspan two years ago breathed life into the administration's proposal for tax cuts," said Senator Thomas A. Daschle of South Dakota, the Democratic leader. "Today, I think he gave the kiss of death to the plan that was offered this year."
Investors showed little reaction to Mr. Greenspan's comments on the economy. The real impact of his comments was political.
Mr. Greenspan bluntly challenged the administration's contention that big budget deficits pose little danger or that the government can largely offset them through faster economic growth.
"We are all too aware that government spending programs and tax preferences can be easy to initiate or expand but extraordinarily difficult to trim or shut down," Mr. Greenspan told the Senate panel.
"Faster economic growth, doubtless, would make deficits easier to contain," he added. "But faster economic growth alone is not likely to be the full solution to the currently projected long-term deficits."
Mr. Greenspan also took issue with the Bush administration's arguments that budget deficits have little effect on interest rates.
"Contrary to what some have said, it does affect long-term interest rates and it does have an impact on the economy," he said.
And while he endorsed Mr. Bush's basic idea of eliminating the taxes paid by individuals on corporate dividends, he also said that any such change should be offset by other tax increases or spending cuts.
That is quite different from Mr. Bush's approach. The administration has estimated that the dividend plan will cost the government $385 billion over 10 years.
John W. Snow, who took over as Treasury secretary this week, told reporters today that there was no need to offset the costs of the dividend plan with either tax increases or spending cuts.
"I think a large part of the cost of the dividend plan will be recovered in the future," Mr. Snow said.
Mr. Greenspan's opinions today will probably not be enough on their own to block Mr. Bush's general plan for a new round of tax cuts. But many analysts said crucial elements of the tax plan were already in trouble with moderate Republicans, and they predicted that the Fed chairman's testimony would add to the resistance.
"Even if his remarks influence only two or three votes, that would be the difference between success and failure," said Rudolph Penner, a former director of the Congressional Budget Office.
As in the past, Mr. Greenspan sprinkled his testimony with a mix of remarks that offered something to Republicans and Democrats alike. He did not criticize the specifics of Mr. Bush's tax proposals, saying there were "pluses and minuses," and he repeated his longstanding support for eliminating the double taxation of corporate dividends.
But his focus on deficits clearly put him at odds with the administration, and his endorsement of the dividend tax cut was at best tepid in light of his recommendation that any such cut be "revenue neutral."
"We think this makes Mr. Greenspan more of a problem for Mr. Bush than his opponents," wrote Ian Shepherdson, chief United States economist for High Frequency Economics, an economic consulting firm in Valhalla, N.Y.
Assessing the broader economic outlook, Mr. Greenspan repeatedly expressed the hope that economic growth would accelerate as soon as the uncertainty about a possible war had been dispelled.
In its monetary policy report to Congress today, the Fed predicted that economic growth could reach an annual rate of about 3 percent by the end of this year.
Mr. Greenspan expressed little worry that consumers, who have provided the main source of economic growth over the last year, were in danger of becoming too bogged down in debt. Though Mr. Greenspan conceded that household debt had increased, largely as a result of home-refinancings brought on by low interest rates, he said consumers' debt-financing burdens were still about normal.
Mr. Greenspan did rattle one sector of the economy today: government-sponsored companies like Fannie Mae and Freddie Mac that bundle mortgages and resell them to investors.
Mr. Greenspan implicitly supported stricter oversight of such companies, which have come under growing pressure from lawmakers to provide more disclosure about their liabilities.
"These are legally private corporations and should be handled the way private corporations are handled," Mr. Greenspan said.
The shares of Fannie Mae dropped $1.21, to $63, and Freddie Mac fell 67 cents, to $54.47, after Mr. Greenspan testified.
Censorship, like charity, should begin at home; but unlike charity, it should end there --Clare Booth Luce
[ edited by bunnicula on Feb 11, 2003 09:49 PM ]
posted on February 11, 2003 10:49:49 PM new
In my opinion, what's really eating at the economy and the Stock Market is the unpredictable. By having Bush take office as appoointed by the Supreme Court, it has thrown a *HUGE* monkey wrench into the economic works. Couple that with Bush & Co's Hands-Off approach to running the domestic ship and the Republicans fairly quiet about it all and you end up with a lot of people suddenly feeling the need to save their money and not spend it. Up until recently, the Republicans kept trying to shed the blame by pointing at Democrats and Clinton -- which worried a lot of people, because it shows how little they are willing to go to accept responsiblity. A very BAD sign to the Stock Market. Lastly, people still believe the Democrats about the economy -- and for good reasons. They need to STOP trying to shove all of the money at the To5% or 1% or whatever and take this matter seriously.
(1) Bush and the Republicans need to do as Bush said in the State of the Union address recently -- stop blaming someone else. Take responsibility in order to restore confidence.
(2) Get back onto the helm at the good ship USA!
We need a Marshal Plan for long term recovery and stability. That means, that unless Bush can show us IN WRITING exactly how we are to pay for the War against Iraq, and how we are going to get back to the robust Clinton Economy, Americans will continue to hold their cards closer and investors turning Bear.
posted on February 12, 2003 05:58:46 AM newWe need a Marshal Plan for long term recovery and stability. That means, that unless Bush can show us IN WRITING exactly how we are to pay for the War against Iraq, and how we are going to get back to the robust Clinton Economy, Americans will continue to hold their cards closer and investors turning Bear.
OMG... SOMETHING I CAN AGREE WITH... WELL WONDERS NEVER DO CEASE...
posted on February 12, 2003 01:15:19 PM new
Greenspan is in a very precarious position. His message is unmistakable, but if he said what he believed any more directly his words would most probably precipitate a crash, for which of course he would be blamed. There's still some hope that the Iraqi war will eventually save the economy through securing cheap oil and at this point he sees that hope as the lesser of the evils. I think that Bush is hoping to time it so that the influx will be in place to create something of an economic boost before the 2004 elections, which is part of the reason for the rush -- the other of course is to avoid world and national scrutiny of motivations and risks, and tighten restrictions on freedom of expression and privacy internally. As a business plan for the United States, the tables at Monaco would be a better bet.
posted on February 12, 2003 01:54:35 PM new
I predict he was entirely too honest and W will find some way to ruin him now. Kiss him gone in 6 months I say.
posted on February 12, 2003 06:16:08 PM new
Are you people smoking crack?? Greenspan is the main reason why the economy is a wreck.
1. Greenspan let the bubble continue to grow in the '90's. He warned about "irrational exuberance" but he kept interest rates low.
2. Then, all of a sudden he slams on the brakes with steep interest rate hikes. The bubble violently bursts, and the NASDAQ loses 80% in less than a year.
3. After billions of dollars of wealth disappeared, and after the venture capital dried up, Greenspan left interest rates high for many months.
4. When he finally realized that the economy was tanking, he took his sweet time in lowering interest rates. But it was too little, too late. And here we are.
The idiots who blame Bush for the bad economy seem to forget that most wealth (including mine) was lost well before Bush took office.
posted on February 12, 2003 06:26:20 PM new
"You got to know when to hold 'em; know when to fold 'em.
"Know when to walk away; know when to run.
"You don't ever count your money while you're sittin' at the table.
"There'll be time enough for countin' when the dealin' is done."
posted on February 13, 2003 10:39:53 AM new
Grassley announces what was revealed from the Enron investigation:
Mr Grassley also said the report called into serious doubt the ethics of tax advisers and the "desperate" bankers, accountants and lawyers who helped Enron.
"The report reads like a conspiracy novel, with some of the nation's finest banks, accounting firms and attorneys working together to prop up the biggest corporate farce of this century," he said.
They also believe that tax officials were involved.
posted on February 13, 2003 12:23:48 PM new
Businesses reject support of Bush/Ashcroft spy network..................................
Suspicious minds
Employers not ready for co-workers ratting on each other
By Andrea Coombes, CBS MarketWatch.com
Last Update: 12:01 AM ET Feb. 13, 2003
SAN FRANCISCO (CBS.MW) -- A looming war and threats of terrorist activity have put America on edge, with the workplace becoming a fertile breeding ground for suspicion.
But even as the Dept. of Homeland Security asks the nation to prepare for the worst, U.S. businesses have done little to get ready for an expected increase in co-workers pointing the finger at each other over activities that appear out of the ordinary.
In fact, employers in sensitive industries that have considered setting up programs encouraging workers to report other workers' activities have decided against such plans, said Philip Deming, of Philip S. Deming and Associates, a human-resources consulting firm that works with companies on a variety of security issues.
"It would really create a hostile relationship with union membership and they are afraid to do that. Those businesses that do not have union representation just don't think it's wise or prudent to do that because of the morale issue," Deming said.
"It makes the employee relationship very adversarial. It brings up McCarthyism and Big Brother."
Without policies in place to deal with accusations of terrorist activity lobbed by one worker against another, most businesses simply handle claims on a case-by-case basis -- and that can lead to problems, especially in the area of discrimination.
For instance, "an employee goes to the supervisor and says 'Omar has got this suspicious box he keeps bringing in and out every day,'" said Neil Martin, a partner with law firm Gardere, Wynne & Sewell, which represents employers in discrimination suits.
"If the supervisor goes up to Omar and says 'open up the box, what's going on here,' then Omar may have a complaint that he's being singled out because he's Iranian, and that nobody else is being targeted that way."
Charges of workplace discrimination spiked after Sept. 11, and experts say complaints will increase again in the event of war. But employers are unprepared to handle the tension between upholding anti-discrimination policies on the one hand, and investigating suspected terrorist activity on the other, experts said.
Employers "have an obligation to investigate it in a reasonable fashion but not to do it in such a way that it is discriminatory," Martin said. "More often than not, where discrimination happens is at the supervisor level. It's a knee-jerk reaction. They charge into the situation sometimes ill-advised and ill-prepared."
War effect
With the nation at an orange-alert status on terrorism, the second highest level, and war with Iraq on the horizon, Arab-American tensions are bound to rise.
"We anticipate a rise in employment discrimination" should a war occur, said Laila Al-Qatami, a spokeswoman with the American-Arab Anti-Discrimination Committee (ADC), a group that monitors hate crimes and discrimination. "There will be some sort of ramification. Some people are not going to like working with an Arab-American, or they're going to treat them with suspicion."
She bases that projection on what happened after Sept. 11.
In the 16 months from Sept. 11, 2001 through this Jan. 11, Muslims in the U.S. filed 890 claims of religious discrimination at work, more than double the 414 complaints filed in the 16 months prior to Sept. 11, according to the Equal Employment Opportunity Commission, which investigates workplace discrimination claims.
The ADC received 800 reports of employment discrimination in the year following Sept. 11, a four-fold increase, Al-Qatami said.
Define 'suspicious'
One problem for both employees and employers in assessing how to deal with any potentially dangerous situation is determining what, exactly, is a suspicious activity.
"If you don't have any guidelines as to what could be considered suspicious in your workplace, or the government hasn't issued specific guidelines, then anything could potentially be suspicious," Al-Qatami said, bringing up the case of three Muslim medical students in Florida who were held by police, and then freed, after a restaurant worker thought she overhead a suspicious conversation.
Some say businesses need help from the government in determining how best to deal with tips from workers.
"We've had a lot of alarms from the government but we've had very few positive programs disseminated to businesses to help them understand what their role can be in either the prevention of terrorism or educating the workforce," Martin said. Absent help from outside sources, businesses are ignoring the potential for problems.
"Most employers, thinking they're in the business of producing widgets or whatever, will look to someone else to provide guidance either in the industry or from the government," Martin said.
