I.O.U.S.A - Addison Wiggin [82]
Q: What are the consequences of not being successful in this endeavor?
Paul Volcker: In the future, there will be all kinds of consequences and uncertainty if we don ’ t deal with these problems. But when I look back on my lifetime, it is obvious that letting infl ation get a little bit out of control and not dealing with economic problems effectively in the ‘ 70s led to a very uncomfortable crisis. We don ’ t want to have to go through big recessions again to teach people fi scal responsibility. Instead, we should anticipate what needs to be done while maintaining the growth of the economy. And the threat will always be an unstable economy and an unstable currency. And that ’ s not just destructive to economic life, but it can be destructive to America ’ s position in the world, which to me is the greatest concern.
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168 The
Interviews
Q: Although you cannot resolve it, can you comment on the government spending versus raising taxes?
Paul Volcker: Sure. The big ideological fi ghts in this country concern the best way to deal with some of these problems. One side says, “ Reduce taxes; make governments smaller; governments are ineffi cient and ineffective. ” The other side says, “ Look, we have to be responsible and respond responsibly to some of these challenges by raising taxes. ” My view has always been we ought to make government as effi cient as we can. In some cases that may mean a smaller government, but in other areas it might mean a consensus, particularly in some programs that are maintaining the national defense. Regardless, it ’ s going to take money. And in order to satisfy people and get problems resolved relatively effi ciently and effectively, then we have to pay for it with taxes. In my opinion, we do not have a very good tax system. It ’ s confused, complicated, frustrating, et cetera. I hope that the next president reforms taxes and makes them a little more tolerable so people can support the spending we have to do.
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Dr. Alan Greenspan
Dr. Alan Greenspan served as the chairman of the United States Federal Reserve Board from 1987 to 2006. During his tenure, Dr. Greenspan steered the U.S. economy through the Black Monday stock market crash of 1987, the dot - com boom of the 1990s, and the subsequent bubbles in stocks and housing. Criticized by some, revered by others, Dr. Greenspan is still seen as a leading authority on U.S. economic and monetary policy.
Q: In your opinion and from the data that you ’ ve seen over the last few years, are Americans saving less than they used to and if so, why do you think that might be?
Alan Greenspan: Well, it depends how we defi ne savings. As far as your average American household is concerned, they would argue that they ’ re saving more than enough — or at least until recently they would have said that. The reason [for that mind - set]
is they ’ ve looked at their 401(k)s, and they ’ ve looked at the value of their homes, and they ’ ve looked at their assets generally — and while we economists may say that capital gains do not fi nance real capital investment and standards of living, the average household couldn ’ t care less.
So up until very recently, you will not fi nd any real concern on the part of American households that they ’ re not saving enough; indeed, they have been very happy with what they have. The problem, however, is that that essentially was a mixture of capital gains on homes, stocks . . . on a whole variety of other types of assets [including] their income. The result, basically, is that as those wealth effects begin to reverse, people are going to perceive that they are indeed not saving enough, and hence a signifi cant increase in the amount of savings out of income is