success. could you amplify that, please? guest: greenspan is an interesting figure here. when he retired in early 2006, he was praised lavishly across the political spectrum by most professional economists, by milton friedman, who was a conservative and a longstanding critic of the fed, by a liberal at princeton who had been vice chairman of the federal reserve board. as having been the most successful federal cheerleader in history of the federal reserve system. now flash forward three years, and greenspan has made to be one of the fall guys for the financial crisis, for keeping credit too easy for too long. my view is that the origins -- you really cannot blame greenspan. you cannot blame the bankers by themselves in isolation.

all these people were conditioned by the experience of the last two decades when it became the conventional wisdom that we had got into a kind of a new era. . prosperity, but a kind of underlying indestructible prosperity. we only had two minor recessions in the 1990's and this decade. the recession of 1990-1991, 2001, mild increase in unemployment, 7.8%, the economists call the great moderation. a if you think you live and in less risky world, which that is the conclusion, you begin taking more risk because you are not times. that is the underlying assumption. assumption. so, banks started stallone's, people borrowed more than they could. than they could. greenspan probably kept monetary policy to this for too long.

this contributed and they fed on each other. the underlying cause was the great prosperity. if the conclusion i draw is that the view that we had the we had our loved -- had outlawed in the boom bust cycles, we were not as smart as we thought we were. host: the phone lines are ringing off the hook. we get so many calls about jobs. speaking of the fed, it seems they are on a loan-policy here. -- a low money policy here. what do you think of that? guest: it is going to end at some point. we do not know when it will end. there is division of opinion whether it will end this year or next year.

i think, given the weak state of the economy, it is justified right now. they do face a dilemma. if they face it -- put in place too long, there could be inflationary expectations. it is a problem down the road. they are aware. they are doing the right thing now. i would not want to be in their shoes. host: what about the nation's seniors? they are so affected because so many of them have money in money-market. and their own income has been crimped by the low rate system. guest: they would be in worse shape if the economy was still declining, because the stock market would still be declining for no -- declining. housing prices will be going down more. you have a trade-off between lower interest rates and a

weaker economy. although people who have the money in money-market funds, inflation is very low. the prices are not going up very much. they are not losing that much. host: with regard to that, a related to this, it seems the nation is saving more. is that a good thing? guest: one of the problems that began in the 1980's was people felt wealthier because the stock market was going up. the housing market was going up. they borrowed a lot. we went to look beyond that point. going back to your first question of the budget deficits, essentially, we are having a recognition with their own balance sheet. the americans collectively decided they borrowed too much. lenders are less willing to lend to them on easy terms. they are borrowing less.

if they are saving more out of their current income. that is a drag on the economy. it will continue for some time. host: if this is pessimism and this is optimism, where are you? guest: i am more pessimistic than i used to be. the problems that we had could have been solved or addressed and we continue to procrastinate. host: that go to calls. republican line. caller: good morning. i just had a question on government spending. you get the sense from listening that it is not as effective as you might have. -- might have hoped. it is a two-part deal. the person who purchases goods and services benefit from the receipt of those goods and services, where the person who

has paid for them also benefit. when the government says the spending, it seems like a cut that equation and half at least. do you have any thoughts on that? guest: in theory, if the equation you could forward ought to apply to government spending as well. if the political process is working right for correctly, the thing that the government wants to spend money on ought to be the things that the government want people to spend money on. our democratic system is working well. i do not think of it as a theoretical problem. in practice there may be a problem, because once the government begins spending for a particular group, it is very hard to curb that spending. even those circumstances may change, and the people who receive the money believe that they had a moral and political rights and they are entitled to it.

even if the spending does not have widespread public support, the spending may continue because if the congress tries to cut it off there will be a reaction from infected interest groups. -- affected interest groups. in theory, i do not buy what you say. host: new orleans is next, independent line. caller: i did happen to finish reading an article entitled "america under martial law." it basically goes on to state that the central banks are counting on a popular uprising against the banks in order to go ahead and enact martial law in this country. it goes on to state that an

entrepreneur said that the u.s. citizens will be enslaved by the federal government starting with the health care bill, which he says has more to do with controlling every aspect of the americans' lives and does not have anything to do with medical treatment. it states that fema has no congressional oversight to suspend the constitution. host: let me aninterrupt. does this reflect your point did you? caller: yes, it does. i think the central bank needed to bring down -- the central bank are criminals that want to bring down everyone. government after government, things keep getting worse.

host: let me jump in at this time. guest: i do not agree with you. we have been a democracy for over 200 years. we have had big problems and disagreements. with the exception of the civil war, we settled those within the confines of the political system. we do have a democracy. people revere freedom and liberty. we are going to argue about it. that is the nature of our society i do not believe -- society. the federal reserve is not operated by militants. it is the last place in the world, you will look for it military propaganda. host: you are critical of it. guest: what i was trying to say is -- i have been critical of

the health care bill. i do not believe that given the stated the country's finance that this is the right time for this measure. it makes an already bad situation worse. just to give you a few figures, if you start 2009 and of a get the deficit that have already occurred -- and a look at the deficits that have already occurred by the congressional budget office, it is $13 trillion. that is a lot of money, even in washington. our debt to gdp ratio, the ratio of outstanding debt of the federal government, rises from about 40% at the end of 2008 to an estimated 90% in 2020. that is almost where it was at the end of world war ii. it continues to go up. for the president to make his

first priority a program that increases spending, even though in a technical sense it pays for itself there other spending cuts, it seems to me it was irresponsible. one objection is that the spending cuts and tax increases projected to cover the deficits will not in reality occur. they will be repealed or modified by congress because they are politically unpopular. the second issue is that we are facing $13 trillion worth of debt. they will supply to the existing deficit before we can go out and spend. that was my fundamental problem with the health care proposal. host: next call in louisiana. democrats line.

caller: good morning. i agree with him on one thing. people is not ready for change. i am optimistic about the economy. it will pick up. for example, i want to say that what mr. obama is doing as far as going back, but with this in economic terms. -- let us put this in economic terms. it will have less people on unemployment. with us getting rid of dependent on foreign oil, that money we receive from buying it can be invested in to the clean energy act. that is 10-years of jobs. that money that we are saving

could be reinvested into the clean energy act. everything is a process in government. the corporation could make a change in one day and it is affected the next day. government is a process. the healthcare deal is a process. more people will be covered. but people will be uncovered. we will not have to take the cost of people that go to the emergency room with no health care insurance. the real deficit -- raise social security and we solve the deficit problem. guest: i agree with you to a point. i did not mean to imply earlier when i said i was pessimistic that the economy would not recover. it is recovering. the recovery is very slow. i meant to say we are making our situation worse than it need be by not having solving some of

the long term problems that have been obvious for many decades. i think the economy is recovering. it is a slow recovery. i support the president's announcement yesterday of increased oil and gas drilling off the coast. i wish it had come earlier. it'll be some years before it pays dividends. it will reduce our dependence upon foreign oil. it will create jobs. there'll probably be millions and millions of jobs. it will reduce our trade deficit of fraud and stimulate investment in the united states. all that is good. host: stocks scored best in the first quarter in 12 years. the second quarter can be even better. momentum is good. anyone they used the stock market at the gate of the help

of our economy needs to rethink. -- uses the stock market as a gauge of the help of our economy need to rethink. guest: it is great when the stock market goes up. it is better to have a go of and then down. if you try to calibrate the future of the economy based on movement in the stock market, you will be disappointed. it is an economic barometer. it is also a psychological our barometer. it tends to be moved by a motion. you get large declines. the new get substantial rebound. -- then you get substantial rebounds. in 2008, when the financial crisis was unfolded, the stock market was optimistic about the future. it was after september and the collapse of lehman brothers that

the market really plunge. the market i would say is not agree forecast for the future. host: what are the best barometers? guest: i do nothing it did anything that you can liggett. it is difficult to predict the future -- you can look at. it is difficult to predict the future. back in the '60s, i remember economists felt they had all these economic models and they put every statistic they wanted into the great databases. they could match of what was happening in the present with the past. it turns out the models were very good if nothing changed. as soon as things change, the models were terrible. it is difficult to predict the future. host: republican

-- republican line. caller: i have been an admirer of yours for many years. i think you are a great columnist. i just wanted to say -- hello? guest: i am here. i appreciate the praise. caller: of one to get your opinion of the health care bill -- i wanted to get your opinion of the health care bill and the promises that were made that this bill is deficit neutral and that it actually helps the deficit. i never believe those figures. i do not believe the numbers. i just wanted to hear your opinion. why does the news media accept this as fact when everybody knows those are lies? thank you. guest: i am skeptical that this

legislation will pay for itself. on the other hand, the cbo did score it as producing more -- enough tax revenues and enough spending cuts to cover the increased cost of the legislation. by law, the cbo must make these estimates based on what is in the bill, whether or not it thinks the provisions in the bill are realistic. the skepticism arises not because the bill does not pay for itself on paper. the skepticism arises because we wonder whether or not these provisions will actually occur in practice. the cbo has expressed a certain amount of skepticism as well. my objection would go beyond whether or not the bill pays for

itself internally. even before the bill was enacted, the government was facing massive deficit as far as the eye could see. the debt was roughly $13 trillion. rather than enacting new spending measures, which is what this bill is, it seems to me the government first obligation would be to pay for some of the spending that it already enacted in the past. that the obama administration has not done. that is my fundamental objection. host: indiana is next. independent line. good morning. caller: thank you for your time. i would like your input and opinion on a couple of comments. if you would have thought, i

never would have thought i would discuss economics. i think it is the number one issue that affects the future of my son. do you know that we are in a whole? we have no funds for our unfunded liability for seniors. our debt is owned by the federal reserve and china and japan. we cannot do anything to them. how does the death affect policy? how bad do you think inflation will be? host: how old is your son? caller: he is 5 years old. guest: i have children in the '20s and night -- early 20's and i am not confident of their economic future. i think the basic problem here is that our government and the political system -- the

government has promised people more benefits than people are willing to pay for in taxes. that is the fundamental source of our deficit. there is nothing confident -- complicated about it. at some point, taxes will have to go up and then it it down. if you take social security, medicare, and medicaid. medicare provides health insurance and medicaid provides long-term care -- those three programs by themselves to represent more than 40% of the budget 20 strip out some of the special items. -- when you strip out some of the special items. people like me are about to retire. health care costs are uncontrolled. those costs will go up. you either bring those costs

down or taxes at someone will have to go up. taxes are primarily paid by the working population, which are my children and later your children. just because i am reasonably pessimistic about that equation is the main i think that america will become a poor society. -- does not mean that i think that america will become a poor society. disposable income will continue to go up. that is an open question. host: an hour earlier discussion about the barometers of a healthy economy, and this is your has a thought. -- this viewer has a thought. guest: as a society, we ought to be prudent. as individuals, we ought to be

prudent. if everybody did nothing but say, there would be no economy at all. we have to spend to create jobs or what not. you want to have a healthy balance. the balance became on healthy in this decade when americans are wrote so much to collect -- and let their savings go solo. we are trying to add toward a healthier -- so low. we are trying to get back to a healthier balance. china says more than half their incomes. that seems to be a recipe for economic disaster. host: democratic line. caller: i am like the caller earlier. i have been reading your articles in the newspaper. i was really impressed every time i read your articles. i recently saw about the health care debate where you said you

were against it. out is really disappointed. -- i was really disappointed. all these republicans that are against health care, why do not you people give up your healthcare? you have a job of providing health care. you want to deny someone else's healthcare. you want to keep your healthcare. why do not you give up your healthcare and give it to people who do not have it? host: what is your health care situation? caller: i do not have it. i'm self-employed eat. critics of employees. -- i do not have it. i'm self-employed. they do not want to give it to other people. hosguest: i am not against universal health coverage. we do not live in a perfect

world. the fundamental problem of the health care system is the cost in spending our out of control. that has been one of the reasons it has been hard for many businesses to cover their workers, because health care has become so unaffordable. it makes it more difficult for people to buy individual coverage. my view was because that is the fundamental problem that we ought to tackle the problem first. once we get that problem under control, then we can begin talking about expanding coverage. it is not that i am against coverage. in the realistic world we inhabit, we have to make choices. i think the obama administration a popular choice. i think on policy grounds, it was the wrong choice. in my view, the health care

program he has just signed will actually increase spending and may cost more difficult to control. there are a number of provisions that are alleged to control costs. when you look at them, they are tokens. it is my thought that they will not succeed. host: republican line. caller: good morning to you. and not of the hyperbole coming out to washington is due -- a lot of the hyperbole coming out of washington is due to the information coming out. the way i see this country, it is on its knees in every direction. i believe in taking care of the people who cannot help themselves. that is the problem. if you get the slow pace the obama administration is walking on, it will fundamentally change

this country. the constitution has been shredded. if you look at everything this country was built on, we are going the opposite direction. it is pushing this country towards socialism. if you do not believe that, you see this country as it is now. look at everything this government takes care of, medicare, medicaid. look at the postal service. everything is in the red. independent people and build this country. you know as well as i do it that the middle class is going to get stomped as of this bill makes its way. people talk about running on repealed and replaced. i am not disagreeing that the health-care system is in trouble. it needs to be addressed in small steps.

if this country stand on the direction it is in, we can say we will be a european divide. guest: i share some of your concerns, but i do not share where you end up, which is that we are somehow going to some apocalyptic collapse. we have a what used to be called a mixed economy. we are not a socialist society in the sense that the government owns a lot of the means of production, and the critical industries. the political process interacts with these other. the results are not good. -- with each other. the results are not good. i do not think we are about to sacrifice our freedom and liberty even though as a

practical matter there is a shared responsibility between the government and private sectors. this is one of new ones. looking back historically, -- nuance. looking back historically, if you go back to the 1920's, the federal government was very small. they spend less than 3% of our gross domestic product. after world war ii and the great depression, we emerged with a government that was much larger and have many more responsibilities. in some ways, i think it is over expanded. we have been irresponsible but paying for everything. despite the increase in government