Submitted by Taps Coogan on the 30th of May 2018 to The Sounding Line.
The former Chairman of the Federal Reserve, Dr. Alan Greenspan, recently spoke with Fox Business News to discussed his outlook on the economy, entitlement spending, stagflation, and much more.
Dr. Greenspan notes:
“Let me just say that the two major initiatives of this administration… the corporate tax cut… and deregulation have been very positive forces and indeed you’re already beginning to see the impact of both of those initiatives in the marketplace, but when you look further down the road the demographics are against us. The most productive people in the economy are retiring and the basic structure of productivity growth is being suppressed by the huge increase in entitlements, which largely is not an economic phenomenon, it reflects the aging of the population… The main issue is social security and social security is a significant problem because it is not being funded. The actuaries of the Social Security Administration… say, in sort of a hidden part of the last annual estimate, that in order to get an actuarially sound social security system you would have to cut benefits now and indefinitely into the future by 25%. What that is telling you is that the fiscal system is out-of-whack and while I approve wholeheartedly with the corporate tax cut and the deregulation, the corporate tax cut unquestionably causes the deficit to rise and we are not funding it by other means. So long as the funding is not there, productivity cannot grow and accelerate because what you need is gross domestic savings…”
“We are now under 1% (productivity growth) and productivity growth is the key factor in engendering gross domestic investment. So you can’t have the sort of growth we have had in the past if productivity is flat on its face… the big bulge in entitlements over the years is crowding out gross domestic savings. Gross domestic savings plus saving borrowed from abroad is what our capital investment is all about and we have already engendered $8 trillion in net debt to foreigners. These are trends which cannot continue.”
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