WASHINGTON (AP) – With just three months left before he leaves office, Federal Reserve Chairman Alan Greenspan raised a warning to Congress: The country could face “serious economic disruptions” if bloated budget deficits are not curbed. The Fed chief’s strong comments, made during an appearance Thursday before Congress’ Joint Economic Committee, come after the government produced a $319 billion budget deficit this year – an improvement from the record amount of red ink registered in 2004 but still the third-highest deficit on record. In the short term, costs related to rebuilding after the trio of devastating hurricanes will make it harder to improve the nation’s balance sheets, he acknowledged. In the long term, a huge wave of retiring baby boomers will put massive strains on government resources, he said. “There are no easy choices. Easy choices are long gone,” said Greenspan, whose 18-plus year run at the Fed comes to an end on Jan. 31. Congress is working on separate packages of tax cuts and spending cuts. Even as he sounded an alarm about the dangers that budget deficits pose to the country’s long-term health, Greenspan struck a more positive note about the economy’s current prospects after being jolted by the recent hurricanes. Katrina, Rita and Wilma are likely to “exert a drag” on employment and production in the short term and may aggravate inflation pressures, Greenspan said. “But the economic fundamentals remain firm, and the U.S. economy appears to retain important forward momentum,” Greenspan said in his most extensive remarks thus far on the impact of the storms. The Fed is keeping a close eye on high energy prices to make sure they don’t spark broader inflation. “We are very firm in the notion that this country should not visit the 1970s again in the way of inflation,” Greenspan said, referring to a period where the economy was rocked by skyrocketing prices. On the budget front, Greenspan called on Congress to get the nation’s fiscal house in order and bring the swollen deficits under control. “Unless the situation is reversed, at some point, these budget trends will cause serious economic disruptions,” he said. Persistently large deficits will eventually push up interest rates, Greenspan said. Higher borrowing costs would weigh on the willingness of consumers and businesses to spend and invest and that could be a drag on economic growth, analysts say. “I find it utterly inconceivable, frankly” that persistent budget deficits over the long run “will not have a significant impact on long-term interest rates,” he said. Greenspan repeated his call for lawmakers to restore caps on spending. And, he urged lawmakers to pay for any future tax cuts with either increases in other taxes or reductions in spending. Greenspan said he’d like to see the dividend tax cut extended – but only it it is paid for. “Crafting a budget strategy that meets the nation’s longer-run needs will become ever more difficult and costly the more we delay,” he said. The Fed chief also underscored his belief that benefits currently promised to the baby boom generation through Social Security and Medicare likely cannot be met and probably will have to be trimmed. “We owe it to those who will retire over the next couple of decades to promise only what the government can deliver,” Greenspan said. Greenspan was questioned about the support he gave in 2001 to President Bush’s successful drive to get Congress to pass sweeping tax cuts that totaled $1.35 trillion over 10 years. Those tax cuts are blamed by Democrats for bringing back record deficits. “Do you have any regret about the way you expressed yourself in 2001?” asked Rep. Carolyn Maloney, D-N.Y. Given the facts known at the time, Greenspan said he would still support the tax cuts because of projections, which later proved wrong, that the federal government was facing huge surpluses. The Fed chief’s appearance on Capitol Hill comes two days after the central bank boosted a key interest rate up to its highest level in more than four years to thwart inflation. Oil prices briefly shot up past $70 a barrel in late August, and gasoline prices topped $3 a gallon before moderating. But home heating costs are expected to be much higher this winter than a year ago. “I think people are going to be quite surprised at their heating bills this winter,” Greenspan said. Many economists are predicting the Fed will bump up rates at its next session, on Dec. 13, as well as on Jan. 31, which will be Greenspan’s last meeting. Some analysts also are calling for a rate increase on March 28, which would be the first presided over by Ben Bernanke, President Bush’s choice to replace Greenspan. Lawmakers hailed Greenspan’s economic stewardship. “You’ve done one heck of a job. And I think we’re going to miss you a great deal,” said Rep. Maurice Hinchey, D-N.Y. “The nation is in your debt,” said the committee’s chairman, Rep. Jim Saxton, R-N.J. AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREWalnut’s Malik Khouzam voted Southern California Boys Athlete of the Week160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!
Share The speed and ferocity of the wildfires raging through Northern California’s wine country have caught many residents off guard and left state officials scrambling to contain the flames.But for fire researchers, these devastating blazes are part of a much larger pattern unfolding across the Western United States. So far this year, fires in the U.S. have consumed more than 8.5 million acres — an area bigger than the state of Maryland.“We’re definitely pushing one of the largest fire years this decade,” said Jennifer Balch, a fire ecologist at the University of Colorado, Boulder.The cause is hot, dry conditions nationwide. Heat records have been broken this year in California, Oregon and Montana. Globally, 2017 is among the hottest years on record, thanks in part to human-induced climate change.Wildfires are natural phenomena, and linking any one fire to climate change is difficult if not impossible. Nevertheless, “there is a link between a warmer, drier climate and wildfires,” Balch said. For example, today’s fire season is three months longer than it was in the 1970s, she says. Annually, there are far more large fires nationwide than there used to be.“It doesn’t take a rocket scientist to figure out that forests burn when it’s warm and dry, and we’ve seen more of those years recently,” said John Abatzoglou of the University of Idaho.This year has been “pretty impressive,” he said. “I’m in Northern Idaho, and we had smoke coming from British Columbia and Oregon and California.”In the case of the wine country blazes in Napa and Sonoma, Abatzoglou said a sequence of events set up the wildfires. A wet spring caused the hills to grow thick with grasses and shrubs. That foliage then died and dried out over the hottest summer in California history.Then came unusually strong fall winds, which were not climate-related. The winds caused small fires to grow extremely quickly. “Everybody from firefighters down to homeowners has commented on just how incredibly fast the fires were moving,” said Max Moritz, a researcher at the University of California, Santa Barbara. “That’s really a wind-related phenomenon.”There are things that can be done to reduce the fire threat. Earlier this year, Interior Secretary Ryan Zinke issued a call for more aggressive actions to suppress fires. He encouraged land managers nationwide to clear potential fuel sources, such as dead trees, and expand the clearings along roads to create stronger firebreaks.But Balch and others say these actions are only part of the solution. As fires become more common — and humans build farther into natural landscapes prone to fire — more must be done to protect communities.California has been leading the way in developing regulations to protect against fires, Moritz said. The state fire agency, Cal Fire, has produced fire hazard maps. In high-risk zones, there are building requirements such as fire-resistant roofs and window screens that can block embers from floating into a home.But Moritz points out that the hazard maps exclude urban areas. There, local municipalities have their own building codes, which can be less stringent than Cal Fire’s.He said that more urban areas might need to incorporate fire planning into their communities. That could mean building homes differently or improving evacuation and shelter options for residents. “Almost annually, we’re seeing large, large numbers of homes being lost in big fire events,” Moritz said. “Maybe we need to update our perspective.”Balch said that while the big picture of drought and climate provides some answers about the situation in Napa, the details of individual fires matter. That’s why after the latest wildfires in California burn out, she and other researchers will begin to study exactly what happened.“There are lots of really important questions that we as a scientific community have to answer,” she said. “Particularly when homes are burned and people’s lives are threatened or lost.”