Saturday, September 18, 2010

The Establishment Is Now Concerned About the Deficit (Or is it a sneak attack?)

Gary North is out with a very important must read article. It dissects a recent "conversation with" Alan Greenspan at the Council on Foreign Relations. In the speech, Greenspan warns about the economy, especially the growing deficit problem. He is correct about this problem and North does a great job explaining why. BUT and I mean a big freaking BUT, as two very tough and perceptive woman, Ayn Rand and Barbara Walters, would surely tell you, Greenspan is a snake and social climber.

Greenspan is not going before the CFR to be disruptive. As North points out:
These meetings are important for this reason. The CFR sets boundaries on what constitutes the climate of Establishment opinion. Remember: when anyone says something for the record at a CFR meeting, he has been screened. He is part of the decision-making class. He minds his P's and Q's. He wants to be invited back.
If he is warning about deficits, he knows that the topic can now be discussed in polite society. What's going on here? Why are deficits now allowed to be discussed when in the past the establishment shunned such warnings as something coming out of the crazed goldbug crowd? I suspect the Establishment is in the process of attempting to co-opt the goldbug/doom and gloom crowd.

North pretty much notes this is going on:

I have long used the CFR as an indicator of what the Establishment sees as the possibilities of the Next Big Thing....when someone famous shows up to give a speech for the record, I pay attention. He may say something significant. He may set forth bad news: the Next Big Problem.

Greenspan mentioned this one: the deficit. In a subtle, garbled way, he sounded ominously like the [Doom and Gloomer] Mogambo Guru. "We're all freaking doomed!"

No one argued with him....
These people are beginning to sound like hard-money e-letter writers.
The problem with the Establishment muscling in on the Doom and Gloom crowd is that the Establishment does not see a shrinking of the government as a solution to the growing deficit. They see increased taxes as the solution. In his conversation, Greenspan called for ending the Bush tax breaks. CFR co-chairman Robert Rubin has called for the reinstatement of the estate tax.

Bottom line: The new concern by the Establishment over the deficit must be viewed as a Trojan horse. The huge deficit was obviously caused by out of control government spending. Yet, the Establishment is using the result, the huge deficit, as an excuse to increase government meddling in the economy through higher taxes!

As North states:
Congress will spend every dime of any extra money that is collected.
Watch out for these guys. These new establishment types with their new concern about deficits are not friends of shrinking government, they want the exact opposite. And now their plan is to try and co-opt us.

I fully expect the tax increase talk (because of the deficit) to really heat up after the mid-term elections, and then go into over-drive after the first of the year.


  1. Benn Steil at CFR has been a fan of Hayek and Rueff and is critial of Keynes. He also is relatively supportive of the gold standard and claims that the world went off the gold standard in the 1920s, so the Great Depression is not the result of the gold standard. He has been critical on the government deficits for some times now.

    Also Amity Shlaes seems supportive of Austrian Economics as well.

    I think they are more open to non mainstream ideas than you give them credit for.

  2. Anon,

    That's called "controlled opposition". You get someone within your camp to pose as a member of the outside and then it dupes outsiders, such as yourself, into thinking "they're not all so bad."

    Until the CFR produces a Rothbardian anarcho-capitalist radical firebrand within its ranks, you can rest assured that Benn Steil's love of Hayek is highly qualified and partial in nature.

  3. Peter Orszag is hanging out at CFR, at least until after the election. Then he can take that high dollar job on Wall Street or with a private equity underwriter.

  4. I think you mean "Greenspan called for ending the Bush tax breaks". They're currently set to expire on January 1st, 2011.