Tags: greenspan | entitlements | weaken | economy

Greenspan: Entitlements Will 'Very Dramatically' Weaken Economy

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By    |   Friday, 12 April 2019 01:44 PM

Former Federal Reserve Chairman Alan Greenspan warns that burdensome entitlements and global financial weakness will markedly weaken economic growth in the near future.

The long-time central bank chief “repeated his warnings about the weight that Social Security, Medicare and other programs are having on what have been otherwise solid gains” over the past few years, CNBC explained.

“I think the real problem is over the long run we’ve got this significant continued drain coming from entitlements, which are basically draining capital investment dollar for dollar,” Greenspan told CNBC.

“Without any major change in entitlements, entitlements are going to rise. Why? Because the population is aging. There’s no way to reverse that, and the politics of it are awful, as you well know,” said Greenspan, who led the Fed from 1987 to 2006.

While he said the economy looks “reasonably good” in the near future, he predicts longer-term growth “fades very dramatically.”

The economy “is going to begin to fade out because Europe is not doing well and we still have a problem where there’s a very substantial fiscal problem associated with entitlements.”

To be sure, the U.S. budget deficit has continued to widen since President Donald Trump's 2017 tax overhaul, a trend that began under the Obama administration due to an aging population and rising entitlements, Bloomberg reported.

The tax cuts, which came into effect last year, have exacerbated the U.S.’ deteriorating budget outlook.

The Treasury Department released data on Wednesday showing that the budget deficit widened to $691 billion in the first half of fiscal 2019 as spending outpaced an increase in revenue.

The budget deficit as a share of gross domestic product is expected to widen to 5.1 percent this year, up from 3.8 percent a year ago, according to projections from the White House Office of Management and Budget. The shortfall is expected to be 4.9 percent of GDP in 2020, and further narrow every year through 2024, according to the estimates.

U.S. economic growth cooled by more than initially reported last quarter on revisions to consumer and government spending to 2.2 percent, according to data released last month by the Commerce Department.

The U.S. is facing global headwinds from Europe to China, prompting the Federal Reserve to stand pat on rates for the rest of the year, though policy makers have signaled they’re prepared to move interest rates higher or lower as needed.

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Former Federal Reserve Chairman Alan Greenspan warns that burdensome entitlements and global financial weakness will markedly weaken economic growth in the near future.
greenspan, entitlements, weaken, economy
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2019-44-12
Friday, 12 April 2019 01:44 PM
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