The federal budget deficit is projected to soar during the next two decades, not because federal revenues are projected to decline but rather because federal spending is projected to explode to more than a third of gross domestic product.  Even if all the Bush tax cuts are kept on the books and if additionally the alternative minimum tax is permanently indexed for inflation, federal revenues are projected by CBO to return to and remain right at their historic level of about 18.5 percent of GDP through midcentury.  It's spending that will bring on a crisis of big government, and it is the three big entitlements - Medicare, Medicaid and Social Security - that are driving spending through the roof.

Why didn't Greenspan admonish Congress to eliminate the unfunded Social Security liability by allowing workers to place their payroll tax contributions into personal retirement accounts, thereby transforming the program into a real worker-investment plan?  The proper fix for Social Security is not to raise taxes but to incur some additional short-term debt to finance personal accounts to relieve unbearable long-term debt.  Why didn't he demand that Congress reconsider and repeal or delay the preposterous Medicare Prescription Drugs Benefit that is slated to go into effect next year, which alone will add a bigger unfunded liability to the federal government's balance sheet than the unfunded Social Security liability that already exists?  Why didn't he suggest block-granting Medicaid to the states to get it under control?

The conduct of monetary policy by central bankers today is reminiscent of the practice of medicine by 19th-century frontier doctors:  90 percent art, nostrums and bedside manner, 10 percent science-based treatment seldom affecting a cure and frequently making matters worse yet usually comforting to the patient. It's time to bring the Fed into the 21st century and to give up the nostrum of interest-rate targeting.  It's time for the Fed to let markets set interest rates while the central bank calibrates the amount of liquidity in the economy by paying attention to price-sensitive commodities, not imposing an artificial speed limit on economic growth.