In an interview on FOX Business Network’s (FBN) Mornings with Maria (weekdays, 6a-9a/ET), former Federal Reserve Chairman Alan Greenspan discusses the latest surrounding the Republican push for tax reform, President Trump’s nomination of Jerome Powell as the next Federal Reserve Chairman, and the outlook for Federal Reserve policy with anchor Maria Bartiromo.
Greenspan On Tax Reform: Economically A Mistake To Deal With Sharp Cuts Now
Alan Greenspan on whether the proposed tax bill will move the needle on economic growth:
“Well, frankly, I think that what we ought to be concerned about is the fact that the federal debt is rising at a very rapid pace and there is nothing in this bill which will essentially stop that from happening. So my view is that we are premature on fiscal stimulus whether its tax cuts or expenditure increases. We have got to get the debt stabilized before we can think of those terms…Economically it’s a mistake to deal with sharp reductions in taxes now. I grant you that corporate tax is way out of line on the upside. We are one of the most heavily taxed corporate structures that exists in this world. I think it’s probably wise if we bring down the corporate rate. I like the issue of going down to 20 percent from 35. But don’t look to that as a major factor in expanding the economy. It just brings us back to neutral as far as our relative competitiveness around the world is concerned.”
On Jerome Powell being nominated as the next Federal Reserve Chairman:
“I’ve known him for a number of years. Well before he was on the Fed. And he’s not an economist. But when you think of the complexity of the issues that are dealt with by the staff of the Fed. The research operation for the Federal Reserve system is the best in the world. And he has backing up and supplying information on every subject you can imagine. But Jay has the ability to make judgements given that information base. So I think he’ll do perfectly fine. I think that he is going to confront the problems with a great deal of uncertainty the way all of us who are in the slot must do.”
On economic growth:
“You’ve got to realize that what’s causing the problem and what’s caused the problem for years is that productivity growth has been virtually stagnant. In fact, since the crisis, productivity growth has been a half of percent annually on average for the United States and indeed a good number of the other countries. So with that low a rate for productivity growth, you don’t have an underlying real GDP growth… Remember, we have effective full employment now and we've got pressures now where upward pressure on wages is going to accelerate. Largely because it's supply and demand. So it's a situation which is not conducive to big takeoff -- my general view is the fact that we're not about to go down as far as I can see. But I would be very cautious about having large 3 percent plus rates in GDP growth in the immediate future.”