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March 14, 2005

Greenspan Is Alarmed at the Budget Deficit Alarm Once More On Budget Deficit

Greg Ip reports:

WSJ.com - Greenspan Sounds Alarm Once More On Budget Deficit: "Federal Reserve Chairman Alan Greenspan, continuing his warnings over the federal deficit, said the budget shortfall is a larger risk to the U.S. economy than the gaping trade deficit or large household-debt burdens. 'Our fiscal prospects are...a significant obstacle to long-term stability, because the budget deficit is not readily subject to correction by market forces that stabilize other imbalances,' Mr. Greenspan said in a speech to the Council on Foreign Relations in New York....

Mr. Greenspan said the budget deficit's threat to the economy has been masked by foreigners' readiness to lend to the U.S. to finance its current-account deficit, now running at more than 5% of gross domestic product, or the total value of goods and services produced in a nation. 'The 30 million baby boomers who will reach 65 years of age over the next quarter-century are going to place enormous pressures' on the economy's ability to finance current entitlements, he said, and 'our success in attracting savings from abroad may be masking the full effect on investment of deficient domestic saving.'...

Posted by DeLong at March 14, 2005 08:17 PM