Greenspan On McCain’s Tax Cuts – Again Pretending Spending Cuts Will Be There

Scott Lanman of Bloomberg reports:

Former Federal Reserve Chairman Alan Greenspan said the country can't afford $3.3 trillion of tax cuts proposed by Republican presidential nominee John McCain without corresponding spending reductions. Greenspan, a lifelong Republican and longtime friend of McCain, said today on Bloomberg Television's ``Political Capital With Al Hunt’' that ``I'm not in favor of financing tax cuts with borrowed money.'' McCain has said he would balance the cost of most of his tax cuts with budget reductions, while providing few details beyond eliminating earmarks and other pork-barrel spending

EconomistMom received an email from Jason Furman who is advising Barck Obama. You see – EconomistMom is a deficit hawk type along the lines of the Concord Coalition. Is Greenspan agreeing with us deficit hawks – even though he supported the 2001 tax cuts? Well, EconomistMom reads further into this Bloomberg story citing Greenspan’s excuse for supporting the 2001 tax cut:

“I always have tied tax cuts to spending,'' Greenspan said. In 2001 testimony before Congress, Greenspan was widely interpreted to have endorsed Bush's proposal to cut taxes by $1.6 trillion over 10 years. In the book, Greenspan characterized his testimony as politically careless and said his words were misinterpreted.

Of course – no one in 2001 seriously thought George W. Bush was going to slash Federal spending. No one today should have any illusions that a McCain administration has some magical way of reducing Federal spending while increasing defense spending. I thought Greenspan was a smart fellow – he cannot believe that significant spending cuts will pay for these proposed tax cuts.

And it seems that Douglas Holtz-Eakin - a McCain economic advisor - argues that it is likely that a President McCain will have to increase taxes unless he succeeds at slashing entitlement benefits.