Transcript: Alan Greenspan

GREENSPAN: Oh, no new stimulus for two reasons. One, only 40 percent of the first stimulus has been in place. And there is a considerable debate going on in the economics profession about how effective this stimulus package is. And so mainly because of the fact that as broad as it is and as effective as it will turn out to be, it still has got 60 percent left to go. So in my judgment it's far better to wait and see how this momentum that has already begun to develop in the economy carries forward. STEPHANOPOULOS: Back in August, you thought you would see about 2.5 percent growth in this quarter. Do you still hold to that or do these numbers make you change that view?

GREENSPAN: No. The numbers are coming in higher than that.

STEPHANOPOULOS: Higher than that?

GREENSPAN: Oh yes. It looks as though it's going to be 3 percent, maybe even possibly even higher. The problem with knowing what the third quarter is going to look like is we won't get all of the data for several months. So a lot of -- there is a lot guesswork involved. But it's on-track, at this stage, for more than 2.5 percent.

STEPHANOPOULOS: So more than 2.5. So does that mean we're heading towards a situation where you could actually see an end to the job loss or not quite yet?

GREENSPAN: Well, no, I think we're getting close to that. But remember, the end of the job loss is not the same thing as if the unemployment rate is going to start down. My own suspicion is that we're going to penetrate the 10 percent barrier and stay there for a while before we start down.

STEPHANOPOULOS: Given that, even though you're not for any major new stimulus, what about extending unemployment benefits for people who are out of work? We're going to have more than a million people lose their benefits by the end of the year. Also the idea that there should be some tax credits to make sure that unemployed people are able to maintain their health insurance?

GREENSPAN: Oh, this is an extraordinary period and temporary actions must be taken, especially to assuage the angst of a very substantial part of our population. So I don't actually consider those types of actions stimulus programs. I think that they are essentially programs which support people -- essentially their living standards in part. I grant you it has a stimulus effect, but that would be my primary focus.

STEPHANOPOULOS: How about one other idea. One of the things that I saw in the employment report that surprised me is that how many of the cuts are coming from state and local government. We know they've really been crunched. Would it make sense given that for the federal government to step in with more aid for state and local governments?

GREENSPAN: Well, basically there is a good deal of that in there. What has happened, unfortunately, is that over the last 10, 15 years, state and local governments have picked up their budgets very considerably, and they, having fiscal difficulties, which the federal government itself can't really resolve, I have no view one way or the other, but I do think that will happen.

If you're asking me as a forecaster as distinct from whether it's desirable or not, I think the pressures to do that will be there. But it's a very tricky political (inaudible).

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