Former Federal Reserve chief Alan Greenspan warns the economic impact of the new healthcare reform law could be disastrous if the Congressional Budget Office’s (CBO) projections prove inaccurate.
Greenspan told ABC News’ “This Week” on Sunday CBO is a “first-rate” operation, but significant danger exists should their projections prove inaccurate over time.
“And when you're dealing with an economy in which debt is becoming, federal debt is becoming ever increasingly a problem, it strikes me that when you're dealing with public policy and you're in a position where you have to ask yourself, ‘What happens if we are wrong?’” Greenspan said in response to a question from ABC’s Jake Tapper regarding his thoughts about the newly passed healthcare reform act.
The real danger lies in the possibility the CBO underestimated the healthcare plan’s actual real-world costs. Should the costs come in higher than projected, as many critics believe, the result would be increased borrowing by the federal government that could further damage the nation’s credit and the economy in the long run.
“In other words, in the case now, where our buffer between our capacity to borrow and our actual debt is narrowing, for the first time, I think, in the American history,” Greenspan said. “There's a question, supposing we are wrong on the cost estimates, and, indeed, they are actually much higher than the best estimates can generate, the consequences are very severe.”
When asked by Tapper if the CBO’s projections were too “rosy”, Greenspan said that was a distinct possibility and his gut instinct tells him the real numbers likely will be higher than what the congressional budget watchdog estimated.
“The probability that it (the costs) might be is probably much higher than I think we would like,” Greenspan said.
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