Greenspan Blames Government Spending for Economic Drain

While domestic stock markets focus on the Federal Reserve’s monetary policy, former Fed Chairman Alan Greenspan outlined a much larger economic vexation—growing government spending.
Greenspan primarily decried the massive rise in entitlement costs. He believes they are the primary pressure for the domestic economy.

“To me the discussion today shouldn’t even be on monetary policy it should be on how do we constrain this extraordinary rise in entitlements,” he said in a CNBC “Closing Bell” interview, calling the trend “extremely dangerous.”
Social expenditures in the U.S. were 19.2 percent of gross domestic product last year, up from 15.5 percent in 2005, according to data from the Organization for Economic Cooperation and Development.
Still, the portion of GDP spent by the U.S. on social benefits last year was below the OECD average of 21.6 percent. The majority of member nations individually shelled out a higher percentage of GDP, as well.

Greenspan served as head of the U.S. central bank, known as the Federal Reserve, from 1987 to 2006. Even when pressed, Greenspan declined to comment or characterize the Fed’s policy-making committee’s assessment regarding the nation’s economy subsequent to its most recent meeting. You can see the CNBC interview here.
On the positive side, though, he did mention that he sees a “strong and growing labor market” despite concerns about productivity growth.

Photo: Brookings Institution on Flickr



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