Former Federal Reserve Chairman Alan Greenspan fears the socialist agenda of Senator Bernie Sanders and Democratic U.S. Representative Alexandria Ocasio-Cortez.
“Beware of double-entry bookkeeping -- it’s only one side of an issue,” he told Fox Business Network, talking about such concepts as Medicare for all and the Green New Deal.
“The question is, where is the funding coming from and what does it do to the inflation problem? And because inflation hasn’t taken hold nobody is looking meaningfully at the budget deficit, which is now beginning to rise fairly significantly,” Greenspan said.
There is also another idea gaining steam in U.S. left-wing circles that Washington could borrow much more aggressively without harming the economy.
Prominent politicians including Sanders, a self-described democratic socialist seeking the 2020 Democratic presidential nomination, and Ocasio-Cortez see the idea as a possible way to ramp up spending on social programs. The theory, known as modern monetary theory (MMT), has drawn rebukes from fiscal conservatives and many Democrats as well.
Greenspan admits that income inequality is prompting many to rethink what they once thought they firmly believed.
“Remember the basic problem of inequality is a fact that people are born that way – we are all born differently,” he said. “And when you convert that problem into the marketplace normally you have a significant misdistribution of income and it’s only when we look at it and say, 'This is unfortunate for the stability of the system,' which I think it is, it’s very difficult to do all that much.”
Still, Greenspan said the U.S. economy remains “way ahead of everybody else” in the world.
“[Capitalism] is a very good thing,” he said. “Look at the United States, with all of its problems, started back very early on in 1800, for example. Very low per-capita income, very small relative to Europe – we outpaced the rest of the world basically because it was a capitalist economy. Private enterprise was a crucial issue and individuals basically during the post-Civil War period – the American economy took off and outpaced everybody.”
Greenspan also pointed out that socialism has often failed, most notably in Venezuela, which was once one of the wealthiest, oil-rich economies.
“It’s very sad. They still have the largest oil reserves in the world. That used to be a major international economy – no longer,” he added.
Greenspan is far from alone in his criticism.
To be sure, the head of the International Monetary Fund recently panned the MMT idea.
IMF Managing Director Christine Lagarde, whose institution is tasked with rescuing countries stricken by economic crises, appears to be aligned with critics who consider the theory naive, Reuters reported.
“We do not think that the modern monetary theory is actually the panacea,” Lagarde said at a news conference during last month's spring meetings of the IMF and World Bank in Washington.
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