Greenspan on "This Week" with George Stephanopoulos

Posted on October 4, 2009


Was fortunate to flip on the TV the morning to catch Alan Greenspan on “This Week” with George Stephanopoulos. Here are some key statements during the interview with some additional explanation in parenthesis that I’ve added.

  • The economy loses skills with elongated unemployment (When workers are not working and keeping up with new technology, new processes, and deploying new innovation, the skills of the worker deteriorate and fall further behind competition in the global economy.)
  • Just after the financial crash, business (defined as economic participants) expected production and consumptions levels to fall off far more than they did. This spurred business to cut employment and production more than could have been economically supported. As a result, we’re getting “horrendous” labor productivity numbers, meaning that the output per worker is declining.
  • On unemployment, Greenspan noted that unless there are more than 100,000 new jobs a month, the unemployment rate will not improve.
  • On government intervention and the stimulus package, the focus should continue to be on trying to get the economy going, but don’t be counterproductive. As Greenspan stated, “we’re in a recovery, his is what a recovery looks like. Looking back after this is over, we’ll see ups and downs on a graph but look right through them right through them.” The stimulus package is only 40% spent, so before considering a second package, the remainder (Evan Bayh on Fox News Sunday with Chris Wallace said he would have liked to have the stimulus go into effect sooner.)
  • On GDP growth, Greenspan predicted 2.5% GDP growth in the third quarter and sees the numbers coming in higher than that once the estimates and revisions are completed. We’re getting close to end of job loss, “but this is not the same as unemployment going done. We’ll get to 10% barrier and stay there for a little while.”
  • On temporary actions, he feels that measures such as extended unemployment benefits are needed in the short term and is not a stimulus activity but may have some stimulus effects.
  • On health care, the real problem exists in health care because of the huge fiscal hole as seen in Medicare. There is significant issuance of treasury bonds to finance the budget deficit. Historically we have kept our debt well below the borrowing capacity but that cushion is being tested which will affect LT interest rates. “Budget neutral is not adequate, weed to have address the long term.”


Posted in: economics, innovation