How has the deficit grown so high in the last four years?
Budget deficit worries Greenspan
The Associated Press
May 7, 2004
WASHINGTON -- America's soaring federal budget deficits represent a major obstacle to long-term U.S. economic stability even though they have yet to put pressure on interest rates, Federal Reserve Chairman Alan Greenspan warned on Thursday.
Greenspan cautioned against being lulled into a false sense of security about the deficit, Americans' low savings rates or the nation's trade deficit just because these problems have not yet triggered rising interest rates or a steep fall in the value of the dollar.
Posing the question of whether something has fundamentally changed that would allow the country to "disregard all the time-tested criteria of imbalance and economic danger," Greenspan said, "regrettably, the answer is no. The free lunch has still to be invented."
Greenspan told a banking conference that the federal budget deficit was a bigger worry to him than the soaring trade deficit or the high level of household debt because those two problems can be corrected by market forces.
"Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces that stabilize other imbalances," he said.
Greenspan noted that the federal deficit, estimated by the administration to hit a record $521 billion this year, will amount to 4.25 percent of the total economy after showing a surplus just a few years ago.
"We have legislated commitments to our senior citizens that, given the inevitable retirement of our huge baby-boom generation, will create significant fiscal challenges in the years ahead," Greenspan said.
He has called on Congress to move quickly to address the looming funding difficulties in Social Security by trimming the benefits of future retirees.
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Budget deficit worries Greenspan
The Associated Press
May 7, 2004
WASHINGTON -- America's soaring federal budget deficits represent a major obstacle to long-term U.S. economic stability even though they have yet to put pressure on interest rates, Federal Reserve Chairman Alan Greenspan warned on Thursday.
Greenspan cautioned against being lulled into a false sense of security about the deficit, Americans' low savings rates or the nation's trade deficit just because these problems have not yet triggered rising interest rates or a steep fall in the value of the dollar.
Posing the question of whether something has fundamentally changed that would allow the country to "disregard all the time-tested criteria of imbalance and economic danger," Greenspan said, "regrettably, the answer is no. The free lunch has still to be invented."
Greenspan told a banking conference that the federal budget deficit was a bigger worry to him than the soaring trade deficit or the high level of household debt because those two problems can be corrected by market forces.
"Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces that stabilize other imbalances," he said.
Greenspan noted that the federal deficit, estimated by the administration to hit a record $521 billion this year, will amount to 4.25 percent of the total economy after showing a surplus just a few years ago.
"We have legislated commitments to our senior citizens that, given the inevitable retirement of our huge baby-boom generation, will create significant fiscal challenges in the years ahead," Greenspan said.
He has called on Congress to move quickly to address the looming funding difficulties in Social Security by trimming the benefits of future retirees.
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