Hank Paulson and Alan Greenspan were on Face the Nation today. The former Treasury Secretary and Fed Chairman may well represent as much as we know about economics.
After offering their opinion about what projected deficits will mean for the economy over the next decade, they both very sagely predicted that the Colts would win today's Super Bowl. This was, of course, a brilliant little reminder of the limits of prediction.
Of course, everyone knows that an economy over a ten year period, and the influence of the deficit over economic activity for good, bad, or indifference, is a much simpler thing to predict than a mere game. Because a game, of course, involves the actions of independent agents, the unexpected, herculean efforts, unpredictable strategies, and chance. By contrast, an economy of 300 million people in a world of 6.5 billion, in a time when there has never been more opportunity for innovation in technology or social institutions, has none of that.
R World (Ron Davison muses aloud)
Showing posts with label alan greenspan. Show all posts
Showing posts with label alan greenspan. Show all posts
07 February 2010
27 September 2009
Republican Recalcitrance
As Obama tries to win over the Republicans on his health care reform, it is worth remembering how the votes in Congress fell when Clinton passed the legislation that reversed decades of deficits. Not a single Republican voted for his plan. Gingrich led opposition in the House and Dole in the Senate, where the vote was 50-50 (Gore broke the tie).
Clinton was not, as the Republicans would now want you to believe, forced into deficit reduction by Newt. Advised to lower interest rates, he was instead reducing the deficit in order to win over the Fed (Greenspan could lower short term rates) and bond traders (who could lower long term rates). His strategy worked and helped to stimulate the greatest expansion of the last century.
When Clinton left office, the projection for the surplus through 2015 was $4 trillion. In what now seems almost comical, Greenspan was worried about what would happen when there were no T bills as an investment option. By the time Bush left office, the projection for the same period was a deficit of nearly $4 trillion, a reversal of about $8 trillion (which would fund Obama's health care plan for 80 years - an entire lifetime).
Newt's biggest play for spending reduction was to make drastic cuts to Medicare in the wake of Republicans winning the midterm election in 94. Clinton called his bluff on this, defending health care for the elderly to the point of a government shut down. The result was a rise in the polls for Clinton and a drop for Gingrich and the Republicans.
It is lovely that Obama is inclined towards including the Republicans in the formulation of a health care plan. The lesson from Clinton's presidency,though, may be that the Republicans will simply be an obstructionist party and Obama has to give them a deadline by which they should either come along or stay behind.
Clinton was not, as the Republicans would now want you to believe, forced into deficit reduction by Newt. Advised to lower interest rates, he was instead reducing the deficit in order to win over the Fed (Greenspan could lower short term rates) and bond traders (who could lower long term rates). His strategy worked and helped to stimulate the greatest expansion of the last century.
When Clinton left office, the projection for the surplus through 2015 was $4 trillion. In what now seems almost comical, Greenspan was worried about what would happen when there were no T bills as an investment option. By the time Bush left office, the projection for the same period was a deficit of nearly $4 trillion, a reversal of about $8 trillion (which would fund Obama's health care plan for 80 years - an entire lifetime).
Newt's biggest play for spending reduction was to make drastic cuts to Medicare in the wake of Republicans winning the midterm election in 94. Clinton called his bluff on this, defending health care for the elderly to the point of a government shut down. The result was a rise in the polls for Clinton and a drop for Gingrich and the Republicans.
It is lovely that Obama is inclined towards including the Republicans in the formulation of a health care plan. The lesson from Clinton's presidency,though, may be that the Republicans will simply be an obstructionist party and Obama has to give them a deadline by which they should either come along or stay behind.
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