'Government activism' holding back recovery, Greenspan Says

A "surge in government activism" is hindering strong economic recovery in the U.S., former Federal Reserve Chairman Alan Greenspan writes in the spring 2011 Issue of International Finance.

"The current government activism is hampering what should be a broad-based robust economic recovery, driven in significant part by the positive wealth effect of a buoyant U.S. and global stock market," Greenspan writes, citing the fiscal stimulus, housing and motor vehicle subsidies, and government regulations as examples of such activism.

Though he acknowledges that an "activist government was necessary in the immediate aftermath of the Lehman bankruptcy," Greenspan questions the "utility" of these kinds of mechanisms in encouraging economic recovery today.

A longtime devotee of free-market ideology, Greenspan says that the recent economic crisis may have "cast doubt" on the premise of competitive markets, but adds that government intervention tends to "hobble markets" rather than fix them.

That argument is well suited to House Republicans as they aim to cut federal spending and slash regulations in Congress, arguing that such actions are vital to job creation.

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