Saturday, June 4, 2011

Greenspan 'Scared' Over Deficit; Calls for Debt Ceiling Rise

The debt and deficit problem in the US is so serious that former Federal Reserve Chairman Alan Greenspan finds himself in the position of recommending the highest tax rates in more than a decade.

In an interview with CNBC, the former central bank chief described himself as a "small government, free-market economist" who nonetheless believes that in order to raise revenue and close the debt gap, 1990s-era taxes must be reinstituted.

It's a measure, he said, of how serious the problem has become.

"The fact that I am in favor of going back to the Clinton tax structure is merely an indicator of how scared I am of this debt problem that has emerged and its order of magnitude," he said.

The marginal tax rates fell in the early 2000s under former President George W. Bush, who instituted sweeping cuts that last year were renewed in a deal between President Barack Obama and congressional Republicans.

But the rates, particularly those on Americans earning more than $200,000 a year, have been the focus of intense debate and are considered in peril depending on how next year's elections go. Congressional Democrats see higher taxes as a key to raising revenue to close the budget gap. (read more)