Alan Greenspan wrote an absurd anti-deficit piece in the WSJ today, advancing the argument that it’s a bad thing that we’re not suffering adverse consequences from the deficit:
Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.
Tim Fernholz bats this around a bit, but he neglects what in my view is the key episode here, the time when as Federal Reserve Chairman in 2001 Alan Greenspan warned the country against the prospect of budget surpluses and debt reduction and argued that only large regressive tax cuts could save the country from this specter.
Greenspan did, I think, a good job as a setter of interest rates. But he also consistently abused his prestige to try to manipulate the country into a low-tax, bad-services, high-inequality equilibrium. Out of office he doesn’t set interest rates at all, so all we get is the abuse of his prestige to wage a relentless war against revenue and public services.