Reckless government spending is hurting the U.S. economy and sending the nation towards an economic collapse. At least, that’s the warning from former Fed chairman Alan Greenspan.
In an interview in a CNBC “Closing Bell” on Wednesday July 29th, Greenspan warned that rising entitlement costs and government expenditures have pressured the world’s largest economy. (Source: CNBC, July 29, 2015.)
Over the past decade, as part of government spending, social expenditures in the U.S. grew dramatically. According to data from the Organization for Economic Cooperation and Development (OECD), in 2005 social expenditures were 15.5% of gross domestic product (GDP) compared to 19.2% in 2014. (Source: OECD, last accessed July 30, 2015.)
“To me the discussion today shouldn’t even be on monetary policy it should be on how do we constrain this extraordinary rise in entitlements,’ Greenspan noted, calling the trend “extremely dangerous.”
In regards to the labor market and the overall economy, he expressed his concerns saying, “We are in a period that is some form of secular stagnation. Very specifically, we’ve got an extremely strong and growing labor market, but productivity growth is extraordinarily low.”
“Now the price earnings ratio in the bond market is high enough so that we’re that in the stock market, we would be worrying about it. And I think we ought to worry about this because interest rates are below where they historically have been for generations, indeed, for millennia,” he warned.