Tags: alan greenspan | tax reductions | corporate tax rates

Greenspan: Sharp Tax Cuts in GOP Bill Economic 'Mistake'

Alan Greenspan, chairman of the Federal Reserve from 1987 to 2006.

By    |   Thursday, 09 November 2017 11:52 AM

It is a "mistake" economically to deal with sharp tax reductions at this point in time, and even bringing down the corporate rate won't prove a major means for expanding the national economy, former Federal Reserve Chairman Alan Greenspan said Thursday.

"My view is that we are premature on fiscal stimulus," Greenspan, who served from 1987-2006, told Fox Business' Maria Bartiromo.

"I think politically it's a mistake, I should not say politically, I should say, economically it is a mistake to deal with sharp reductions in taxes now."

However, Greenspan agreed that the corporate tax is one of the most-heavily taxed structures in the world, and that it is "probably wise to bring it down."

"The corporate rate, I like the issue of bringing it down to 20 percent from 35 [percent], said Greenspan. "But don't look to that as a major factor in expanding the economy. It just brings us back to neutral."

Meanwhile, Greenspan said he believes rising entitlements must be stopped, as he has said for years.

"Unless we can do that, and still it is going to slow the rate of growth next year, but then the demographics are going to pick up again, going to accelerate," said Greenspan, but "it is merely an issue of the age structure of the population."

For people who are retiring, "the issue now should not be taxes," he added. "It should it be, how do you slow down and reduce federal expenditures."

Greenspan also discussed Jay Powell, President Donald Trump's pick to replace Janet Yellen to head the Fed, saying he does not expect a lot of change with the transition.

"I have known him for a number of years, well before he was on the Fed," said Greenspan, pointing out that Powell is "not an economist," but that he'll still have information on "every subject you can imagine" and has the ability to make judgments.

"I think he will be perfectly fine," Greenspan said.

The new chairman also will face the challenge of winding down the balance sheet while dealing with the issues of economic growth and inflation, said Bartiromo, but Greenspan said that there is "no doubt" when the federal reserve begins to shrink, it will put upward pressure on rates going out the next few years.

He also said he'd be "very cautious" about having large, three percent plus rates in GDP growth in the future.

"You've got to revise what is causing the problem," said Greenspan. "What caused the problem for years is productivity growth, virtually stagnant...my general view is the fact that we're not about to go down as far as I can see. But would I be very cautious about having large 3 percent plus rates in gdp growth in future."

For a long time, the United States has been relying on monetary policy, said Bartiromo, and Greenspan responded that he thinks "we should be concerned about the federal debt rising very rapidly."

"There is nothing in this [tax] bill that will essentially stop that from happening," said Greenspan.

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Politics
It is a "mistake" economically to deal with sharp tax reductions at this point in time, and even bringing down the corporate rate won't prove a major means for expanding the national economy, former Federal Reserve Chairman Alan Greenspan said Thursday.
alan greenspan, tax reductions, corporate tax rates
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2017-52-09
Thursday, 09 November 2017 11:52 AM
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