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Greenspan reiterates stern deficit warning { May 6 2004 } Original Source Link: (May no longer be active)    http://www.chron.com/cs/CDA/ssistory.mpl/business/2555417 http://www.chron.com/cs/CDA/ssistory.mpl/business/2555417 May 6, 2004, 11:52PM Greenspan reiterates stern deficit warning By MARK SKERTIC Chicago Tribune CHICAGO — Ballooning budget deficits, meager domestic savings and efforts to impede international trade are combining to threaten the nation's economy, Federal Reserve Chairman Alan Greenspan warned Thursday. The nation has "lurched from a budget surplus in 2000 to a deficit," Greenspan said in a satellite address to a Federal Reserve banking conference in Chicago. The country cannot "disregard all the time-tested criteria of imbalance and economic danger," he said. "The free lunch has still to be invented. The problems must be addressed." Greenspan began by detailing problems in the economy, adding that a recent congressional projection had the budget deficit at 4.25 percent of the nation's gross domestic product. The trade deficit is also climbing, he noted, with one measure pegging it at 5 percent of GDP. But such forces have not seemed to hurt some segments of the economy. He pointed out that the yield on Treasury bills maturing in a decade remain low, making the cost of borrowing cheap. "Nor are we experiencing inordinate household financial pressures as a consequence of record high household debt as a percent of income," Greenspan said. He addressed interest rates briefly, saying it is likely a "softening in housing markets would likely be one of many adjustments that would occur" with an increase. On Thursday, Greenspan acknowledged that in a recent address to Congress he was optimistic about the economy's performance over the next year or two. But, he warned Thursday, "the outlook for the latter part of this decade remains opaque." If fiscal problems are not addressed, spending promises can't be fulfilled, he said. While imbalances in international trade and growing household debt burdens are problems, they do "not strike me as overly worrisome," Greenspan said, adding "but that is certainly not the case for our yawning fiscal deficit."

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