Freedom Line Blog

That’s the conclusion of former Federal Reserve Chairman Alan Greenspan, who, in an op-ed published today in The Wall Street Journal, warned that “perceptions of a large U.S. borrowing capacity are misleading,” and “an urgency to rein in budget deficits” can’t come soon enough.

Greenspan notes that public debt has soared out-of-control in the last 18 months, from $5.5 trillion to $8.6 trillion.  Yet, “the typical symptoms of fiscal excess,” notably inflation and a drastic rise in long-term interest rates, remain “remarkably subdued.” The former Fed Chairman writes that such a phenomenon is “regrettable, because it is fostering a sense of complacency that can have dire consequences. … Beneath the calm, there are market signals that do not bode well for the future.”

Greenspan isn’t the first person, nor will he be last, to warn that the nation’s “current federal debt explosion is being driven by an inability to stem new spending initiatives” and that merely “incremental change” in fiscal policy “will not be adequate.” Indeed, everyday Americans concerned about the U.S. debt crisis and who have never before engaged in the political process are literally taking to the streets demanding a policy of fiscal restraint.

If only the Obama Administration and Congress would listen.   As Greenspan put it, the United States “is in need of a tectonic shift in fiscal policy. … Our economy cannot afford a major mistake in underestimating the corrosive momentum of this fiscal crisis.”