Prometheus 6

Quote of note:

The Fed chairman's tone, as he addressed the House Budget Committee on Wednesday, was noticeably more urgent than it was last year or even in Congressional hearings just a few weeks ago.

"When you begin to do the arithmetic of what the rising debt level implied by the deficits tells you, and you add interest costs to that ever-rising debt, at ever-higher interest rates, the system becomes fiscally destabilizing," he told lawmakers. "Unless we do something to ameliorate it in a very significant manner," he added, "we will be in a state of stagnation."

Gee, ya think? And now that you can't artificially drive interest rates any lower than you have, we're back to standard financial physics. Our fiscal policy reminds me of all the plans to manufacture high tech materials in low gravity...you get the results you're looking for only in a situation that can't sustain itself.

Y'all know how I divided people whose job title is "Economist" into two groups, right?

The discussion of Class War Strategies on The NewsHour feature an economist and a salesman posing as an economist....Long term readers know I refer to these professions as Type One and Type Two Economists, respectively. And they know I have no respect for Type Two economics pronouncements, and that I love folks that come to the same conclusions I have.

Greenspan is like a Type 1.5 economist.

Anyway...

Greenspan Says Federal Budget Deficits Are 'Unsustainable'
By EDMUND L. ANDREWS
Published: March 3, 2005

WASHINGTON, March 2 - Alan Greenspan, chairman of the Federal Reserve, warned on Wednesday that the federal budget deficits were "unsustainable," and he urged Congress to scrutinize both spending and taxes to solve the problem.

Mr. Greenspan also warned that the deficits could be driven sharply higher by costs connected to the aging of the baby boom generation, particularly entitlement programs like Social Security and Medicare. While reiterating his support for President Bush's plan to offer private accounts as part of overhauling Social Security, Mr. Greenspan urged lawmakers to tackle the program's problems now, rather than later.

The assessment was Mr. Greenspan's gloomiest to date about the government's budget straits. Unless Congress takes major action to reduce the deficits, preferably, he said, by deep cuts in spending, annual budgetary shortfalls will continue and closing those gaps will become even more difficult.

Though Mr. Greenspan has made similar pleas in the past, he spoke more urgently on Wednesday and disagreed more adamantly with Republican lawmakers and Mr. Bush, who have steadfastly refused to put restrictions on new tax cuts.