–Budget Experts Note Few Show Concern About U.S.’s Fiscal Future
–Analysts: Dem Support Of Big Parts of Bush Tax Cut Hypocritical
–Analysts: Fin Markets ‘Don’t Want to Hear’ Greenspan’s Discuss Deficit

By John Shaw

WASHINGTON (MNI) – Bill Frenzel, a wily and wise veteran of
Washington fiscal battles for forty years, says the debate over the
future of the so-called Bush tax cuts has confirmed that neither the
Democratic nor Republican party is very concerned about the nation’s
long-term deficit situation.

“The Republicans basically want to borrow about $4 trillion from
China over the next decade to fund these tax cuts. The Democrats, as
careful custodians of the public purse, only want to borrow $3 trillion
over the next decade,” says Frenzel, a former Republican congressman who
is now a guest scholar at the Brookings Institution.

“So as our fiscal situation moves into really dangerous territory,
the debate between our two leading parties is how deeply to cut taxes
over the next decade. That’s not encouraging,” he said.

Frenzel said he has little hope that even if Republicans were to
win control of Congress next year, President Obama and the GOP majority
would “really engage on fiscal policy.”

“My great fear is that the situation is going to have to get even
dire, perhaps approaching a crisis, before the two parties get serious
about the deficit,” he said.

Regarding the fate of the Bush tax cuts, Frenzel said he “wouldn’t
be surprised” if there is a post-election agreement to extend the full
tax cuts for a year or two–and then let most of them expire.

Bob Bixby, executive director of the Concord Coalition, also
believes that in the intense tactical maneuvering over the future of the
Bush tax cuts, leaders in Washington and those in the financial markets
continue to miss the central truth.

“The tax cut story we hear everyday focuses, of course, on the
differences between the two parties, the coming clash, possible
compromises and so forth. What is most surprising is how much the two
parties agree on. Both parties support the extension of a pretty
expensive package of tax cuts,” he said.

“For Republicans who espouse fiscal discipline this is
hypocritical. For Democrats who have spent the last decade linking our
fiscal problems to the Bush tax cut, it’s pretty hypocritical to support
the renewal of three-quarters of them,” he added.

Those calling for the extension of most or all of the Bush tax cuts
almost always cite the weakness of the economy as a central reason,
saying this would be a bad time to “increase” tax rates.

Former Federal Reserve Board Chairman Alan Greenspan, in a recent
interview on the PBS Newshour, challenged the central premise of this
argument.

“I don’t quite agree with those that say that the tax cut lapsing
will have a major impact on the economy,” said Greenspan.

He added that allowing tax cuts to expire, as scheduled, would have
a “negative impact” on the economy, but added that continuing to run
massive deficits could pose a “catastrophic” threat to the American
economy.

Greenspan added that he continues to favor spending constraints to
play the lead role in deficit reduction.

The former Fed chairman lamented that both parties are pursuing
fiscal policies that are damaging the nation.

“I must say that the Republicans, I think, have been cutting taxes
with borrowed money, and the Democrats have been spending with borrowed
money. They agree only on the borrowed money,” he said.

Frenzel noted that Greenspan’s recent fiscal views are not often
referred to on Capitol Hill or on Wall Street.

“When Alan was selling large tax cuts everyone said that he was a
real genius. Now that he is selling austerity and fiscal discipline
nobody seems to remember who he is,” Frenzel said.

** Market News International Washington Bureau: (202) 371-2121 **

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