| Enough Already |
5 May 2003
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Greenspan Wants No Tax Cuts
Federal Reserve boss Alan Greenspan was in front of Congress last week explaining how finance works to Senators and Congressmen again. He is required by law to do this, and he's pretty good at it. There ought to be a law, though, requiring legislators to listen to him and understand what he is saying. Many couldn't cope with the idea that he has no desire for a tax cut under current circumstances.
The problem arises from a political philosophy that says "taxes are bad." When times are tough, taxes must be cut to revive the economy. When times are good, surpluses must be returned to the taxpayer. This is nonsense, and it is accepted political orthodoxy in 1.5 of America's 2 political parties.
Economically, the federal budget needs to run surpluses and deficits in a countercyclical manner, and fed monetary policy needs to be accommodating or tight as a further restraint on the market's tendency to over-shoot equilibrium.
The US economy is sluggish, but growing. Jobs are tight; unemployment in April was 6%. The war is over, and consumer confidence jumped 20 points on that news. The budget deficity is big, but not excessive in a $7 trillion economy. Things are about to take off, according to Mr. Greenspan. There is nothing more to fix. Congress, therefore, should go pass a law on teaching economics in schools and get out of the business of sabotaging the coming recovery.