Once again, Federal Reserve Board chairman Alan Greenspan has proven his genius as a master of what George Orwell called “doublethink.” In one simple sentence, he can predict opposite outcomes and speak the truth at the same time. As our modern Delphic oracle, he might produce a weather forecast in which he says, “It will be a bright sunshiny day unless it rains.” In short, his forecast must turn out to be true, although it is no forecast at all. He might as well have kept his meaningless mouth mute.
Here is an example of how he operates: In his testimony before the Senate Banking Committee earlier this month, Greenspan spoke strongly in favor of Bush’s tax cuts but, aware that the mounting federal debt is bound to wreak endless havoc with the American economy in the not-too-distant future, he insisted that expenditures must be cut to bring the budget into better balance.
In making this suggestion, Greenspan is tacitly admitting that the conventional rationale offered by the administration and its supporters (including Greenspan) in favor of the tax cut was (and is) dead wrong. They forecast that cutting taxes for the richest would enable the economic elite to invest in expanding enterprises and the creation of new jobs to stimulate the economy and thereby help everybody, including Uncle Sam, who, it was touted, would be the beneficiary of greater income as a result.
So, just what expenditures would Greenspan reduce to compensate for the government’s lagging income? He might have suggested that we turn over the job of reconstructing Iraq to the United Nations and start bringing our boys back home. That would be a gargantuan savings. Or he might have proposed that the president proclaim that the political pork with which the budget is heavily loaded is not kosher and should be eliminated. But, here’s the way Greenspan proposes to cut costs, as reported in The New York Times: “Mr. Greenspan urged lawmakers to examine cuts in mandatory entitlement programs like Social Security and Medicare.”
The blind blundering of the Bush administration and its apologist Greenspan is a firm confirmation of the maxim of the American philosopher George Santayana, who said, “Those who do not know the past are condemned to repeat it.” The naughty notion that cutting the taxes of the richest would benefit all was put to the test not so many years ago in the days of Ronald Reagan. When he came into office in 1981, the federal debt was a trillion dollars ($909 billion, to be exact.) Reagan decried this unbearable burden of debt. Purportedly to reduce the deficits and the mounting debt, he cut taxes in almost exactly the same way as Bush has. When he left office in 1989, the federal debt had tripled.
Cutting the taxes of the richest did not, as proclaimed, stimulate the economy and, thereby, enrich the federal coffers. It did just the opposite. It deprived the U.S. Treasury of billions for each of eight continuous years.
Here was a lesson in history that should have guided our present administration. We may assume that this lesson was not learned by Bush. His school years suggest that he is not, unfortunately, a great learner.
But what about Greenspan? He is no fool. He has all the information he needs at his fingertips. He knows what happened under Reagan. So why does he endorse a repeat of the discredited and destructive “drip-down” dunce dance? Can it be that he is less interested in doing what is rational than in finding a politically acceptable rationale?