Saturday, September 15, 2007

Greenspan slams GOP: Will Garrett Understand?

When Federal Reserve Chairman Ben Bernancke showed up for his first hearing in front of the Financial Services Committee last year, on which our Representative Scott Garrett sits, Garrett made the following comment:
"We can actually understand your answers," said Rep. Scott Garrett, R-N.J., during the generally cordial hearing.

It was portrayed as a warm welcome for Bernancke, but with a new book coming out from former Fed Chair, Alan Greenspan, I'm wondering if it was being truthful as well. It seems the White House and the Republican run Congress either didn't understand, or didn't care what Greenspan said. Now, Greenspan seems to be taking them to task.

The Greenspan quote from this book that is lighting up news sources around the world is this:
"The Republicans in Congress lost their way," Greenspan wrote. "They swapped principle for power. They ended up with neither. They deserved to lose."

Here's how the New York Times described the passage:
Mr. Bush, he writes, was never willing to contain spending or veto bills that drove the country into deeper and deeper deficits, as Congress abandoned rules that required that the cost of tax cuts be offset by savings elsewhere.

Those rules referred to were PAYGO, which the Republicans had implemented as part of the Republican Revolution of 1994, then abandoned in the "Tax Cut" revolution of 2002, and were reinstated by the Democrats earlier this year. While the quote seems to be Earth shaking, Greenspan started calling for a return for PAYGO more than two years ago:
However, the brief emergence of surpluses in the late 1990s eroded the will to adhere to these rules, which were aimed specifically at promoting deficit reduction rather than at the broader goal of setting out a commonly agreed-upon standard for determining whether the nation was living within its fiscal means. Many of the provisions that helped restrain budgetary decision making in the 1990s--in particular, the limits on discretionary spending and the PAYGO requirements--were violated ever more frequently; finally, in 2002, they were allowed to expire.

Reinstating a structure like the one provided by the Budget Enforcement Act would signal a renewed commitment to fiscal restraint and help restore discipline to the annual budgeting process. Such a step would be even more meaningful if it were coupled with the adoption of a set of provisions for dealing with unanticipated budgetary outcomes over time.

I suppose that's one of Greenspan's answers Garrett didn't understand. As those that read this blog or follow Garrett's website know, when the Democrats reinstated PAYGO, Garrett argued against it saying the following:
"Regrettably," continued Garrett, "the Democrat leadership also chose to approve a change to budget rules that could have no purpose other than to justify tax increases. And, that I could not support. It is a shame that in taking the step forward with strong earmark reform, the Democrat leadership chose to take two steps back in fiscal discipline."

On this one, I'll go with Greenspan. Back in January, I laid out the effects PAYGO actually had on Federal spending:
Under the PAYGO rules of the 90's, the government actually ran surpluses for a short time and held average increases in government spending under 4%. PAYGO expired in 2002 before Garrett entered the House, and since then new spending averaged over 10% and we've had record deficits. Garrett, the "fiscal conservative" recently voted against the reinstatement of PAYGO.

Most reasonable people would say that what has been going on since Garrett arrived in Congress is not fiscally responsible. Although Garrett's often given credit for holding the line on spending, since arriving in Congress, Garrett has voted for every one of the Republican budgets he could (FY 2004, FY 2005, FY 2006, FY 2007). It should be interesting to see how he and the others on the Hill respond to this book.

Kind of like Lee Iacocca's must read Where Have All the Leaders Gone?; Greenspan has nothing to lose with this book. At least one other quote cited by the AP seems to make you think Greenspan's not holding back:
Of the conflict in the Middle East, Greenspan said: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."

Honestly, I can't wait to read this thing.

1 comment:

Anonymous said...

We have two kids who served in Iraq and they believe it was about oil. After the first invasion their primary duty 4 years ago was to secure the oil fields.