Greenspan: Neither Candidate Has Suitable Plan for ‘Extraordinarily Dangerous’ Deficit

Tuesday, 06 Nov 2012 10:54 AM

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Deficits pose a very formidable risk to the U.S. economy, although neither President Barack Obama nor Republican challenger Mitt Romney have offered sufficient details to narrow gaping spending gaps, said former Federal Reserve Chairman Alan Greenspan.

Both candidates have outlined spending plans that include various tax adjustments and plans to adjust healthcare and other costs though concrete specifics are lacking on both sides.

"It's an extraordinarily dangerous situation," Greenspan said, addressing the country's growing debt burdens and failure to deal with it, according to the Wall Street Journal.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

Sooner or later, the middle class will feel the pain of either tax hikes or spending cuts as the country pays down debts and narrows deficits.

"I believe we underestimate the size of current financial imbalances and how difficult it will be to resolve them. We're trying to do this without pain. There's just no credible scenario in which that happens," Greenspan said.

Other experts agree that whoever wins will face mounting fiscal challenges requiring immediate decisions.

“Regardless of who’s elected, either one is going to have to deal with a rather high deficit and (deal with) the pending retirement of a number of baby boomers who have been critical to the economy,” said Sean Egan, managing director of the Egan-Jones ratings agency, according to CNBC.

Add to that, whoever wins the election will have little time to address fiscal reform.

On Dec. 31, a series of tax breaks are scheduled to expire at the same time automatic cuts to government spending are set to take effect, a combination known as a fiscal cliff that could send the country sliding into recession next year if left unchecked by Congress.

Investors will remain in standby mode until they see commitment among the nation's policymakers to fiscal reform.

“Here in the U.S., investors are at a standstill. They’re saying until they figure out what’s happening post-election, they’re not going to commit capital to anything," Cole Smead, director of marketing at Smead Capital Management, told Bloomerg.

"The fiscal cliff has been a ‘seen’ risk that been priced into the market. Are we going to come to a good solution? Yes. Are we going to do that in a timely fashion? No. We always come to that at the very last second.”

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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