Greenspan: Odds Of US Recession Less Than 50%

Alan Greenspan said the odds of a recession have grown since earlier this year, even though "the economy is not doing badly at this stage."

In an interview with The Associated Press on Monday, the former Federal Reserve chairman put the odds of a recession at greater than one in three. "But best I can judge it is less than 50%," he said. Greenspan's one-in-three prediction earlier this year rocked Wall Street, which has been suffering through a period of turbulence. A deepening housing slump and a spreading credit crunch have raised fears on Wall Street, on Capitol Hill and on Main Street about the country's economic health. Many analysts are counting on the Federal Reserve to lower interest rates on Tuesday to provide some relief. On other issues, Greenspan said the U.S. must look at ways to reduce gasoline use both as a matter of national security and to protect the environment. Greenspan said he favors a tax on gasoline to help curb demand. But recognizing that this could be an "undue burden" on poor people, he suggested a rebate of some sort. There is a national gas tax of 18.4 cents a gallon. The interview with Greenspan dovetails with the release and promotion of his new book, "The Age of Turbulence: Adventures in a New World." In the interview, Greenspan also expressed fresh frustration about expanding social programs, especially at a time when a wave of 78 million baby boomers will start to retire next year, putting a huge burden the country's resources. He singled out Medicare, which is projected to go bust by 2019 unless something is done. "The whole slew of candidates - it's mainly Democrats, but some Republicans - want to add to it more," Greenspan said. "Nobody wants to...look at the issue and come up with a rational solution. This is, I regret to say, irresponsible." In his book, Greenspan suggests Medicare benefits would have to be cut substantially for the affluent, whom he envisions having copayments approaching 100%. His concerns come as Democratic presidential candidate Hillary Rodham Clinton on Monday unveiled a health care plan built around universal coverage. The price tag: about $110 billion a year. Other Democratic candidates also have their own health care proposals.

Critic of Bush's Fiscal Policies

Greenspan ran the Fed for 18 years, under four presidents, until early 2006. President George W. Bush was surprised by the criticism leveled against him and his administration by Greenspan in his book, the White House said Monday. Greenspan accused Bush of not responsibly handling the nation's spending and racking up big budget deficits, saying he and Congress' former GOP leaders abandoned the party's conservative principles favoring small government. "My biggest frustration remained the president's unwillingness to wield his veto against out-of-control spending," Greenspan wrote in his book. White House press secretary Dana Perino defended Bush's fiscal policies and said that veto threats from the president were enough to keep spending from spiraling too high. Under Bush, government spending for the fight against terrorism increased, and Perino said the Bush administration doesn't apologize for acting on behalf of "the safety and security of the American people." Large projected surpluses were the basis for Bush's $1.35 trillion, 10-year tax cut approved in the summer of 2001. Those surpluses never materialized and have since turned into deficits, so Greenspan wrote that the tax-cut goal was "no longer entirely appropriate." Perino brought this up as one of the more perplexing parts of the book for the White House. "The president was a bit surprised by some of the criticism in the book," she said. "Remember in late 2000, we were headed into a recession and tax cuts were the prescribed remedy. And that has borne out to be one of the best decisions we made in order to keep the economy growing like it is." Greenspan gave a major boost to Bush's tax-cut plan in testimony before Congress in 2001, arguing then that a tax cut could help the economy deal with sagging growth. A recession that began in March 2001 ended that November. In his book, Greenspan weighed in briefly but pointedly on the Iraq war, saying: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil." In the AP interview, however, Greenspan said ousting Iraqi leader Saddam Hussein was vital to securing world oil supplies. Saddam was "very dangerous" and had "to be taken out," Greenspan said.