In October 2008, former Federal Reserve Chairman Alan Greenspan famously admitted during testimony before Congress that he was wrong about regulation of the U.S. financial system. Asked by Henry Waxman (D-CA) if "your ideology was not right, it was not working?" a humbled Greenspan lamented:

"I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms."

Now, with a Democrat in the White House and nearly nine years after he blessed President Bush's budget-busting 2001 tax cuts for the wealthy, Alan Greenspan has become a born-again deficit hawk.

In Senate testimony Thursday, Greenspan strongly endorsed the deeply flawed Conrad-Gregg proposal to create a deficit commission, warning that the need to curb the American budget deficits "is more urgent than at any time in our history."

In testimony prepared for delivery before the Senate Homeland Security Committee, Greenspan warned that the United States faces the threat of an unprecedented "fiscal crisis" because of record red ink.

Of course, when it really mattered, when he could have made a difference, Alan Greenspan gave George W. Bush a green light for red ink as far as the eye can see.

When he took office on January 20, 2001, President Bush inherited both a balanced budget and a CBO-projected 10-year surplus of $5.6 trillion from Bill Clinton. But just five days later on January 25, 2001, Chairman Greenspan gave Bush and his Republican allies the air cover they needed to proceed with the $1.4 trillion tax cut package passed later that year. Greenspan testified to the Senate Budget Committee that "having a tax cut in place may, in fact, do noticeable good." As CNN noted at the time, "the Fed chairman's backing of tax cuts as economically sound likely will provide a boost to the new administration's proposals."

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Woody Allen in Take the Money and Run

I gotta tell you, the new found concern the Republicans possess for deficit spending is so unintentionally hilarious. They must thank their lucky stars for the mindless memory hole that is the collective American consciousness to not remember the drunken sailor spending that defined the past eight years. Evidently, from the guests this morning, spending will again be the focus, with lots of little digs on how the stimulus is obviously not working and how the best choice is to keep the Bush tax cuts. With Larry Summers, Christina Romer and Alan Greenspan as scheduled guests, what are the chances that someone will bring up sensible legislation and regulation such as the Glass-Steagall Act as the way to avoid another economic collapse? Not bloody likely, methinks. Also, our favorite grasping-to-be-relevant McCain minion, Joe Lieberman, will be back to give his very best Deputy Dog whine on how anything the Democrats propose for health care will cause him to have to filibuster reform. That's Joe, taking the (health insurance) money, and running.

ABC's "This Week" - Lawrence Summers, director of the White House National Economic Council; Rep. Eric Cantor, R-Va.

CBS' "Face the Nation" - Sens. Mitch McConnell, R-Ky., Jay Rockefeller, D-W.Va., Ben Nelson, D-Neb., and Joe Lieberman, Connecticut independent.

NBC's "Meet the Press" - Christina Romer, chairwoman of the White House Council of Economic Advisers; former Federal Reserve Chairman Alan Greenspan; Gov. Jennifer Granholm, D-Mich.; former Gov. Mitt Romney, R-Mass.

NBC's "The Chris Matthews Show" - Dan Rather, Kelly O'Donnell, Helene Cooper, Andrew Ross Sorkin. Topics: Obama's Big Contradictions on Health Care, War & Peace and Economic Recovery; The Cultural Chasm on Global Warming.

CNN's "State of the Union" - Summers; Sens. Mark Warner, D-Va., and John Thune, R-S.D.

CNN's "Fareed Zakaria GPS" - A timely debate between Bjorn Lomborg and Paul Krugman on global warming. Plus a free-ranging discussion with a panel of stars on everything from Obama's Nobel Prize to what is happening in Dubai.

CNN's "Amanpour" - General Stanley A. McChrystal - commander of the U.S. forces in Afghanistan.

"Fox News Sunday" - Sens. Judd Gregg, R-N.H., Claire McCaskill, D-Mo., and James Inhofe, R-Okla.; Rep. Ed Markey, D-Mass.; Inez Tenenbaum, chairwoman of the Consumer Product Safety Commission.

So, what's catching your eye this morning?

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Master economist Bill O'Reilly last night proposed that, to shrink the federal deficit, President Obama adopt the Bill O'Reilly Bold Fresh Economic Recovery Plan: halt "runaway" federal spending, keep the Bush tax cuts, and best of all, institute a federal sales tax.

O'Reilly wants just a 2 percent tax to last only two years. He thinks that'll close the deficit and get the dollar back on solid footing.

He brought on Neil Cavuto afterward. And say what you will about Cavuto, he's not an economic dunce. Like some people. And he tried to explain to O'Reilly that sales taxes don't work that way; they actually would suppress economic demand at exactly the time it needs to be rising.

This went whistling right over O'Reilly's head (duh). What Cavuto left unmentioned, of course, is that a sales tax is one of the most regressive taxes known to man; the tax burden resulting from consumption taxes disparately falls on the lower and middle classes. Guys with big mansions like Bill O'Reilly, however, are perfectly fine coming up with more taxes for working stiffs to pay.

A "federal sales tax" is what's otherwise known as a "consumption tax." It's worth remembering that, back in 2003, George W. Bush floated a similar idea (the suggestion then was to replace the entire income-tax system with a consumption tax), it was shot down pretty quickly.

As Angry Bear explained back then:

There are a number of reasons, including social justice, why a regressive tax is not a good idea, but that's a topic for a later post. Instead, the question is why a consumption tax is worse than an income tax. First, it will surely cost more than it is expected to. Why? Because naively setting the target consumption tax in a revenue-neutral fashion will actually lead to a decline in revenue. A consumption tax increases the cost of the final good to the consumer, meaning that for any price that stores charge, consumers buy less after the tax is imposed than before. Most states have sales taxes around 8%. To replace all income taxes with consumption taxes would require a federal consumption tax of at least 15% on top of the states' 8%. So things will change from the scenario in which, when a store sells a DVD player for $100, the consumer pays $108 to a situation in which the consumer pays $123. Consumers care about price after tax, not before (question: can you buy a $100 DVD player with only a $100 bill?)! So what happens when the effective price to consumers goes up? They buy less DVD players! But the government can not collect sales (consumption) taxes on unsold DVD players. As an economic aside, some, but not all, of the impact of the tax would be borne by sellers. In the current example, the retail price might fall to $95 ($5 less for stores) and the after tax price to consumers would be $95*1.23=$116.85 (an $8.85 increase). Stores get less and consumers pay more, as a result the total volume of goods traded will fall. More generally, any move to a consumption tax that proposes a neutral tax rate, one such that

"(the value of all goods sold * proposed rate) = Income Tax Revenue"

will not generate the same revenue as under the income tax because it fails to account for the fact that the volume of commerce will fall (economists call this "dead weight loss").

Put simply: Consumption taxes drive down economic activity because people will spend less, necessarily. O'Reilly's 2 percent tax won't even cover the decrease in economic demand that would result.

Incidentally, O'Reilly still owes Paul Krugman an apology.

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h/t Bob Cesca:

Joe Scarborough thinks the $3 trillion Iraq war that was accompanied by tax cuts didn't balloon the deficit more than the current healthcare bill. You know, the healthcare bill that's entirely paid for -- and will actually reduce the deficit.

Guest Joe Conason made the mistake of pointing this out, stirring Scarborough into one of his little freakouts. Of course he denied supporting the combination of wars and tax cuts, which, if you watched any cable news during that time, is total horseshit.

Nothing like pointing out a few facts to make Scarborough's head explode. I don't know how Conason manages to suffer through being a guest on that show.

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Good old Mitch McConnell. You can always count on him for the IOKIYAR argument. He seems to have a bit of a memory problem when it comes to the use of reconciliation. Of course we can count on John King not to ask him about it either. Sadly that is all too typical of the media.

From Media Matters--LA Times reported McConnell's criticism of reconciliation without noting his past support of process:

The Los Angeles Times reported Sen. Mitch McConnell's criticism of Democrats' potential use of the reconciliation process to pass health-care reform without noting that he repeatedly voted in favor of using reconciliation to pass the Bush tax cuts.

Transcript:

KING: Well, I want you to listen, not to the president, but I want you to listen to your own voice. You spoke here in Washington on Friday to a conservative gathering about the health care debate and you voiced quiet confidence about the Republican position. Let's listen.

(BEGIN VIDEO CLIP)

MCCONNELL: We're seeing it today in the debate over health care. Ordinary Americans speaking their minds, dismissed and ridiculed by people in power. The reason they are doing this is clear, because we're winning the argument.

(END VIDEO CLIP)

KING: Define "winning" for me. Is winning blocking the Democratic plans and ending this year without a health care reform bill reaching the president's desk?

MCCONNELL: No, winning is stopping and starting over and getting it right. I don't know anybody in my Republican conference in the Senate who's in favor of doing nothing on health care. We obviously have a cost problem and we have an access problem.

But there's a very big difference about whether or not it's appropriate to have a major rewrite of about one sixth of our economy in the process. My members just don't think that's the right way to go. We want to fix the health care system, but we don't want to do or have a $1 trillion over 10-year cut in Medicare, not to make Medicare more sustainable, but to start a new program for others.

We don't think it's a good idea to raise taxes on small businesses and on individuals in the heart of a recession. There are some serious differences about what ought to be done. KING: I saw your speech just before I went over to see the president. So I asked him about it. Listen to this exchange.

(BEGIN VIDEO CLIP)

KING: Mitch McConnell told the conservative group, we're winning the health care debate. What do you think of that?

OBAMA: Well, you know, they were saying they were winning during the election too.

(END VIDEO CLIP)

KING: A confident president there, saying he will get health care. He also said in an interview with Univision that's airing this morning that he would love Republican votes, but I don't count on them. I don't count on them. Mr. Leader, let me ask you, if they go forward and they do this with all Democrats, what does that do to the environment down the road? Some Republicans have said well then don't expect our cooperation on financial reform. Don't expect our cooperation on Afghanistan. Is this one issue health care, or could it poison the well?

MCCONNELL: Look, it's not about winning or losing, it's not about the president, it's about American health care and getting it right. And if they try to use this legislative loophole called reconciliation, what they'll be doing, in effect, is jamming through a proposal to rewrite the economy with about 24 hours of debate.

Basically, a legislative loophole to do a massive rewrite of one sixth of our economy. I think that that will produce a very, very severe reaction among the American people, who are already, according to the Gallup poll, not in favor of the direction we're taking on this very important issue.

KING: Help me understand if there's a gap between the audience in the sense that you say here, it's not about winning or losing, but you were very clear to that conservative group, we're winning the argument.

MCCONNELL: Well, by winning, the definition of winning is to stop and start over and do it right.

I always ask teabaggers when I run into them, how any federal deficit has hurt them personally? They can't respond to that. They have no answer except to cry "socialism."

Sure, it's much better to have a surplus like Clinton did, but these same deficit hawks were quite happy when the Bush tax cuts came down and the rich got richer and the economy collapsed. But I ask again: How has deficit spending hurt you?

Long term debt is nothing to sneeze at, but when we're talking about reforming health care for America, who really cares if it's $700 billion for 10 years or $1 trillion or $1.5 trillion? (By the way, I love the way the press never tells America what it would cost per year because then the figure doesn't sound so bad. They make it appear that the cost is $700 or 900 billion a year.)

Go ask a teabagger about costs and see what they say. What will it matter in the long run? We can figure out how to pay for it. Even FDR was hampered by these deficit hawks when he brought the country out of the Great Depression, and now these deficit hawks almost put us back into a Depression because they were so deficit crazy.

The deficit hawk is code for keeping the rich---rich. And then finding ways to keep their money pouring in.

Digby has a great post up today about costs:

The Peterson Foundation is ready with the news. They released a report (pdf) on the Kennedy Bill today...

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The fact is that if all these benefits were actually realized, the country would be far, far better off, both financially and otherwise. Nobody expects that spending will go down, merely that the growth in spending will be less. Therefore, if the government finds itself having to pay out all that money in health care benefits, this healthier, more prosperous nation can surely afford to levy the necessary taxes to pay for it, right?

I don't give a damn what this is going to cost in 2029. And nobody else should either because these projections are based on bullshit. Nobody can see that far into the future. If we can pay for it now, then we should do it now. And if it costs more down the line, then we will find a way to pay for it. This nonsensical obsession with deficits decades into the future is nothing more than a scam designed to keep the gravy train going for the wealthiest Americans at the expense of everyone else.

If these numbers are correct, then the fiscal scolds are going to have to argue that people today have to die so that wealthy people in 2029 don't have to pay higher taxes. It's that simple.

The president is also talking about having a deficit neutral bill, but he's being attacked for it by the usual suspects.

Citizens for Tax Justice point out what I was saying just the other day: We only hear all this crying and moaning about the deficit when it's something for regular working people, and not a powerful lobby. And of course, the Republican'ts are right out there in front of the Hypocrisy Parade:

And yet, many of the lawmakers who argue that the health care reform legislation is “too costly” are the same lawmakers who supported the Bush tax cuts.

Their own voting record demonstrates that health care reform is not a matter of costs, but a matter of priorities.

It’s difficult to see how the Bush tax cuts could provide us with two and a half times the benefits of health care reform. In 2010, when all the Bush tax cuts are finally phased in, a staggering 52.5 percent of the benefits will go to the richest 5 percent of taxpayers.

President Bush and his supporters argued that these high-income tax cuts would benefit everybody because they would unleash investment that would spark widespread economic prosperity. There seems to be no evidence of this, particularly given the collapse of the economy at the end of the Bush years.

The tax legislation enacted under President George W. Bush from 2001 through 2006 will cost $2.48
trillion over the 2001-2010 period.

This includes the revenue loss of $2.11 trillion that results directly from the Bush tax cuts as well as the $379 billion in additional interest payments on the national debt that we must make since the tax cuts were deficit-financed.

[...] Over the upcoming decade (2010-2019), the costs of the health care proposals approved by three committees in the U.S. House of Representatives are projected to be around $1 trillion. (One committee trimmed the costs of its health care bill below that amount, but an official estimate of the cost reductions was not available at the time of this writing.)

The chairmen of the three House committees have explicitly stated that their goal is a final bill that
is deficit-neutral in the decade following enactment.

It’s unclear if they have accomplished this yet, since the Congressional Budget Office has not yet issued final cost estimates of the bills, and the legislation is likely to change before the full House votes on a final bill. But President Obama and
Democratic leaders have also committed to ensuring that health care reform will not increase the budget deficit.

Under the House bills, roughly half of the costs would be offset with savings in our existing health care programs, while the other half would be offset with a surcharge on the incomes of wealthy taxpayers.

In contrast, President Bush and his allies in Congress never even attempted to replace the revenue lost as a result of their enormous tax cuts. The Bush tax cuts were deficit-financed, which increased the national debt and resulted in greater interest payments on that debt, as already explained.

These figures make clear that costs cannot be the real concern of lawmakers who oppose the House health care legislation and yet supported the Bush tax cuts. Their position seems to be that showering benefits on the wealthiest five percent of taxpayers and leaving the bill for future generations is preferable to making health care available for all at a much lower cost and paying that cost up front. That demonstrates a different set of priorities than most Americans have, but it doesn’t demonstrate much concern about costs.

For the second time in six weeks, John McCain has challenged the press and the public to "name a single issue" where's he changed positions since 2000. Sadly for the supposed maverick, his growing list of reversals, flip-flops and turnabouts now numbers in the dozens.

None of which deterred McCain from pretending otherwise in an interview Wednesday with the CBS affiliate in Washington, DC. Asked, "where is the John McCain from 2000?" and "has something changed," Mr. Straight Talk responded:

"You’ll have to tell me what’s changed. I love it when they say, 'Oh McCain has changed.' And I say, 'What have I changed on?' They can’t name a single issue or they’ll name an issue and it's false. I’m the same guy. I’m proud of our campaign."

Last month, McCain threw down the same gauntlet during his disastrous appearance on ABC's The View. When host Joy Behar lamented, "I don’t see the old John McCain…I understand why - you want to get elected," McCain instinctively went to battle stations:

"I’ve been through this litany before, where I say, 'ok, what specific area have I quote changed?' Nobody can name it...I am the same person and I have the same principles."

As it turns out, not so much.

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