Tuesday, September 20, 2011

Greenspan: Cut back now or face devestating consequences

Economic growth is likely to be slow for years, increasing pressure on Congress to cut entitlement spending, former Federal Reserve Chairman Alan Greenspan said in remarks before a Senate panel.

"There is no credible scenario of addressing our current fiscal problems without inflicting economic pain," he told a Senate Finance subcommittee today.

The former Federal Reserve Board chairman said his preferred option for addressing the U.S. budget deficit is a plan put forth by House Budget Committee Chairman Paul Ryan, a Wisconsin Republican. Greenspan told the Senate panel that because Ryan's plan lacks votes for passage, Greenspan prefers a proposal from the Simpson-Bowles deficit-cutting commission, which addresses the deficit by ending tax breaks as well as through spending cuts.

"I do not know if whether a U.S. budget crisis is immediately on the horizon or is years off," Greenspan said. "What I do know is that if we presume that we have a year or two before starting serious long-term restraint, and we turn out to be wrong in that optimism, the impact on financial markets could be devastating." more