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Greenspan's Idea of 'Cheap Price' to Pay for Tackling Deficit Crisis Greenspan's Idea of 'Cheap Price' to Pay for Tackling Deficit Crisis

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Greenspan's Idea of 'Cheap Price' to Pay for Tackling Deficit Crisis

photo of Catherine Hollander
November 16, 2012

One of the biggest challenges posed by the fiscal cliff is enacting reforms that don’t hurt the economy in the short run while establishing a sustainable long-run solution to the country’s rising budget deficits.

But maybe too much emphasis is being placed on the short-run risk to the economy, former Federal Reserve Chairman Alan Greenspan said Friday.

“If the cost of getting out from under this problem is a moderate recession, I would say it is a cheap price,” Greenspan said at an event hosted by the nonpartisan Peter G. Peterson Foundation. The nonpartisan Congressional Budget Office has estimated that the economy will enter a recession in the first half of 2013 if nothing is done to address the year-end threats of tax hikes and spending cuts that make up the cliff.

“Somehow thinking we're going to get through this thing without paying, that's a load of nonsense,” Greenspan said. 

Greenspan cautioned that problems in the markets as a result of fiscal concerns are likely to creep up rapidly. “The one thing about markets is they don’t give you any advance notice,” he said. 

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