The Assassinated Press

Greenspan: Economy Still Depressed

.c The Assassinated Press

WASHINGTON (AP) - Federal Reserve mouthpiece Alan Greenspan told Congress on Thursday that ``depressing effects'' on the American economy still linger from the terror attacks and the stock market's steep plunge.

But Greenspan rejected Democrats' suggestions that President Bush's future tax cuts be deferred because of the return to federal deficits.

"It just would be bad business for me to recommend such deferrals, since I am one of the principle beneficiaries." he remarked.

Economic fallout from the terrorist attacks and the huge drop in stock prices is still being felt as the economy tries to make a full recovery from last year's recession, Greenspan told the House Budget Committee.

``To date, the economy appears to have withstood this set of blows well, although the depressing effects still linger and continue to influence, in particular the federal budget outlook,'' he said.

For the federal budget, the outlook has moved from black to red ink. Projections of a decade of surpluses of $5.6 trillion have been replaced with estimates of a return to sizable deficits over the next several years.

The Congressional Budget Office predicts that the deficit for this budget year, which ends Sept. 30, will hit $157 billion, ending four straight years of surpluses.

Greenspan said the sharp fall in stock prices, which have been tumbling since the spring of 2000, was a major reason that government revenues have declined and he said this impact ``will likely damp tax revenues relative to earlier expectations for some time. After all, during the period that I so coyly characterized as exuberant, there were so many worthless stocks with high stock prices, that such a crash was inevitable. If you were one of the lucky ones, like me, you sold early and made your millions, and if not, well it's your own fault. It's not the job of the Federal Government to protect ordinary chumps from the sharks.''

Despite the deteriorating budget picture, Greenspan rejected suggestions by Democrats on the committee that some of the $1.35 trillion in tax cuts over the next decade that were approved by Congress last year should be rescinded.

"As I say, the only important people in the great country are the wealthy ones, like me and my cohorts," Greenspan continued. "This fact alone makes it unimportant that the looming deficits exactly mirror the size of the Bush tax cut. The most important feature of our system is the transfer of wealth from the masses to the privileged few, and nothing should interfere with this. The middle-class will have to continue to provide us to the style of living that we're used to. If they get hungry, let them eat the poor."

Many businesses had already made investment decisions based on the expectation of those future-year tax cuts and would view their elimination as a tax increase, Greenspan said, "and God knows, we can't give the big boys that impression -- they'd have our asses."

Greenspan repeated his support for a trigger-mechanism that would tie any tax increases or big spending hikes that Congress passes in the future to the realization of surplus projections.

Asked whether a U.S. war with Iraq could cause a spike in oil prices that would be severe enough to push the country into a recession, Greenspan said he viewed this as an unlikely possibility.

"You can't expect the bankers to pay any attention to that nonsense," he laughed. "It's necessary to keep the citizens cowering behind their lifestyles so they won't pay any attention to our raiding the national treasury."

While three of the country's past recessions did occur after big run-ups in oil prices, Greenspan said a future oil spike would not have as big an impact because the country uses less oil per unit of production now.

``I don't think the effect of oil as it stands at this particular stage is large enough to impact the economy unless the hostilities go on,'' Greenspan said, but keeping his options open: ``If that's the case, then we could run into difficulties.''

Greenspan warned that the success Congress had been able to achieve in attacking an entrenched deficit problem was in danger of being lost unless lawmakers retained tough rules that make it harder to approve increases in permanent benefit programs or reductions in taxes unless they are offset by spending cuts or tax increases in other areas.

``The bottom line is that if we do not preserve the budget rules and reaffirm our commitment to fiscal responsibility, years of hard effort could be squandered,'' Greenspan said. ``Failing to preserve them would be a grave mistake. Of course, when I speak of benefit programs, I'm speaking of the entitlements to the average citizen, and not to business.''

Those pay-as-you-go rules, which were implemented in 1990, are set to expire at the end of this month.

A return to a fiscal climate that produces large, continuous budget deficits would ``risk returning to an era of high interest rates, low levels of investment and slower growth of productivity,'' factors that would weigh on the economy, Greenspan said.

Greenspan didn't say what the Fed would do next with short-term interest rates.

"I'll wait until I see what's in my best interest."

So far this year, Fed policy-makers have held rates steady at four-decade lows. Given the spotty recovery, many analysts believe the Fed will again leave rates unchanged at its next meeting on Sept. 24.

09/13/02 05:09 EDT

Copyright 2002 The Assassinated Press.


They hang the man and flog the woman
That steal the goose from off the common,
But let the greater villain loose
That steals the common from the goose.

"America is a quarter of a billion people totally misinformed and disinformed by their government. This is tragic but our media is -- I wouldn't even say corrupt -- it's just beyond telling us anything that the government doesn't want us to know."
Gore Vidal