Aren't you, like, three and a half years late?
Greenspan Issues Warning of Deficit's Impact on Economy
By TERENCE NEILAN
The head of the Federal Reserve voiced a note of concern today about the effects of America's soaring national budget deficit on the country's long-term economic stability.
"We in the United States have been incurring ever larger deficits," the Fed chairman, Alan Greenspan, said. He added that "we have lurched" from a budget surplus in 2000 to a deficit that is projected by the Congressional Budget Office to amount to 4.25 percent of gross domestic product this year, or about $500 billion.
The "yawning" budget deficit, he told a banking conference, was a bigger concern to him than the equally growing trade deficit or high household debt.
"Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces that stabilize other imbalances," Mr. Greenspan said.
He added that one issue that worries most analysts is the inadequate national saving rate, which he described as "meager."
Another concern, in the face of the widening budget gap, is the commitment made by the United States to senior citizens, he said.
"We have legislated commitments to our senior citizens that, given the inevitable retirement of baby-boomer generation, will create significant fiscal challenges in the years ahead," he said, his words transmitted by satellite from Washington to the conference in Chicago.
"Has something fundamental happened to the U.S. economy and, by extension, U.S. banking that enables us to disregard all the time-tested criteria of imbalance and economic danger?" he asked.
Then, answering his own question, he said: "Regrettably, the answer is no. The free lunch has still to be invented."
