There is a very interesting discussion going on right now on NBC’s Meet the Press regarding the current debate over the raising the debt ceiling which has lead to a discussion of our general budget situation. Let me preface this by saying that I am certain that we in the blogosphere have been wholly unrealistic about status of the current budget/spending situation in Washington with my peers on the left screaming about protecting entitlement programs at all costs and my friends on the right screaming about cutting taxes at all costs. Neither position takes into account the full picture and in many cases intentionally obfuscates pieces of the equation that are politically uncomfortable for one side or the other.
The reason I find this Meet the Press discussion so interesting is that David Gregory has invited Alan Greenspan to the table and as a result, what would normally be a race to see who could bark their political platitudes louder than the other has turned instead into a rather reasoned discussion of the situation at hand. I personally credit the reverence in which Greenspan is held by both sides of this argument with making this such an interesting discussion.
That said, one question arose that prompted Mr. Greenspan to say something I did not expect.
David Gregory – Is it realistic to say that taxes can’t be raised if we’re gonna get serious about the deficit.
Alan Greenspan – The data show something very interesting about endeavouring to curtail budget problems of the type that we have. The IMF, a number of well know academics have all observed that if you have a disproportionate part of your budget cuts from tax increases it won’t work and indeed the economic impact of cutting back on spending is rather modest and the IMF is saying to the point of possibly being insignificant. But having said that I think this crisis is so imminent and so difficult that I think we have to allow the so called Bush tax cuts all to expire. That is a very big number. But having put the rates back to where were in the Clinton administration I would argue that everything else should be either cutting spending or taking out the subsidies which are in the tax expenditures.
So he is saying that the Bush tax cuts need to expire because they are huge (read “a very big number”), that we can’t fix the problem by raising taxes alone, that spending cuts alone are insignificant and that in the end entitlement reform is necessary. This is the discussion that needs to be taking place right now in Washington. That said, I am certain that by the time I have hit “publish” on this post someone on either the right or left will already have denounced Greenspan as a partisan hack.
UPDATE: So far my prediction has not come true. As a matter of fact nary a peep has been uttered about Greenspan’s comment. The first place to pick this story up was Bloomberg but so far the blogosphere remains quiet.