MercoPress. South Atlantic News Agency

Greenspan says US economic growth slowing

I think they ought to be cautious, but nervous doesn't help

Alan Greenspan, who served for 19 years as chairman of the Federal Reserve and has made a new splash with a memoir critical of Republicans and the Bush White House for not getting better control over federal spending, says today that the odds of a recession in coming months are “less than 50-50”.

Of course, that comment belies the way he sees currents moving: A while back, he would have said the chances were about one-third, Greenspan says on CNN's Late Edition with Wolf Biltzer, in an interview on the show airing from11 am to 1 pm EDT today. He also speaks of the impact of the costs of the war in Iraq. For a look at Greenspan's remarks, courtesy of CNN, read on: Excerpts from the interview of Alan Greenspan on CNN's Late Edition with Wolf Blitzer:BLITZER: A lot of people are watching this program who are nervous, maybe understandably so, about what is going on. How nervous should they be generally about the American economy? GREENSPAN: I think they ought to be cautious, but nervous doesn't help. I think the best way of putting it is that the American economy's rate of growth is definitely slowing down. And because the housing industry, and more specifically, home prices, the odds of a recession over the next six to nine months have gone up from about a third, which is where I thought it was about in March, to somewhat between a third and a half. BLITZER: Now define recession. You are talking in terms of like an economist, that would be successive quarters where there is negative growth, is that right? GREENSPAN: Precisely. The odds of that happening are less than 50-50. BLITZER: What needs to be done now by the president, by the Congress, by the Federal Reserve to make sure there isn't even a mild recession? GREENSPAN: I doubt very much if there is anything that can or should be done. Because remember, we have a very complex, self-calibrating, self-adjusting economy. On immigration:BLITZER: Now you know you are going to be criticized for that. They are going to say, why should you let these people come in and get these jobs, these are good jobs, when there are Americans who could be getting these jobs? Explain why you think it is good to let the immigrants come in and take these jobs. GREENSPAN: If there were enough Americans for those jobs, the rate of increase -- a skilled wage premium, which has been gradual, persistent in creating a significant inequality of income this country, if we were able to educate enough Americans to fill those jobs, those wages wouldn't be rising, inequality wouldn't be rising. And what I consider a very considerable threat to our society would not exist. The reason I looked for bringing skilled immigrants in is we pay the highest skilled wages in the world. We would attract a large coterie of very skilled people. The increase in supply would suppress the wage levels of the skilled and bring the degree of inequality back more into line. On Greenspan's remarks that "the Iraq war is largely about oil:" GREENSPAN: Well, actually, I'm talking about my view in there. In other words, what the real economics of the dangers are. As far as the administration is concerned, I have no reason to disbelieve what they have been saying, namely that there were weapons of mass destruction. I thought there were weapons of mass destruction because of the Saddam was behaving, what was he hiding? On the costs of waging war in Iraq:BLITZER: We are almost out of time, but economically, $2 billion, maybe $3 billion a week being spent on the war in Iraq. Can the U.S. economy afford $100 billion or $150 billion, $200 billion a year for this war? GREENSPAN: Well, let me just say that the reason why Cheney's numbers are correct and indeed his views are correct, my concern is in the longer term, we are not confronting the long-term budget imbalances. There is no question that we are spending a great deal on the war, hopefully that will come down. That will not solve the very significant longer-term fiscal problems, very specifically Medicare. And I think that is what the Congress -- the Republican Congress failed to address. That is what we are failing to address now. And unless we get to it very quickly, it is going to become a major problem for this country.