http://readersupportednews.org/opinion/82-82/2627-greenspan-rubin-and-herbert-hoover
Greenspan, Rubin and Herbert Hoover
By Robert Reich,
Robert Reichs Blog: August 9, 2010
Herbert Hoover's disciples are making noises even as America moves closer
towards a double-dip recession.
Fed Chair Alan Greenspan tells the New York Times all the Bush tax cuts
should expire as scheduled, even those that benefit the middle class and not
the rich. His reason: the nation's looming deficit requires it.
On Sunday, former Treasury Secretary Robert Rubin, appearing on CNN, says
any further effort to stimulus the economy would be "counter productive,"
and that policy makers instead should craft a deficit-reduction plan.
Greenspan is only partly wrong. The Bush tax cuts should expire for the top
2 percent of filers (those earning over $250,000) because they save rather
than spend a large portion of their incomes, and we need all the spending we
can get. The cuts should be extended for everyone else because they'll spend
them. The top 2 percent now receive almost a quarter of total national
income, which is one reason why the middle class doesn't have the purchasing
power to lift the economy on its own. The best way to give them even more
purchasing power would be to give the middle class a larger tax cut - say, a
payroll tax holiday on the first $20,000 of income.
Rubin is entirely wrong. As Friday's jobs report shows, the gap between
total private spending (consumers plus business plus net exports), on the
one side, and the nation's capacity to produce goods and services at or near
full employment, on the other, is still a chasm. So government needs to do
more spending now, in the short term, in order to get people back to work
and the economy back on track.
In 1999, both Greenspan and Rubin urged Congress to repeal the
Glass-Steagall Act that had safely separated commercial from investment
banking. In 2000 they argued against allowing the Commodity Futures Trading
Corporation to regulate derivatives. Until recently, Rubin ran the executive
committee at Citigroup, whose excesses required a massive taxpayer bailout.
In 2001 Greenspan supported the Bush tax cuts that blew a gigantic hole in
the federal deficit and mostly benefited the wealthy. In 2002 he lowered
interest rates to near zero but refused to oversee how banks were using
their almost-free borrowings.
Both Greenspan and Rubin are deficit hawks. So was Herbert Hoover and so was
Hoover's Treasury Secretary Andrew Mellon. And look what Hoover and Mellon
got us into. When we least need him, Hoover is being exhumed.
Robert Reich is Professor of Public Policy at the University of California
at Berkeley. He has served in three national administrations, most recently
as secretary of labor under President Bill Clinton. He has written twelve
books, including "The Work of Nations," "Locked in the Cabinet," and his
most recent book, "Supercapitalism." His "Marketplace" commentaries can be
found on publicradio.com and iTunes.
***
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