Greenspan on Tax cuts and national debt-Greenspan tame so far
Drew glad you are making money with dogway but I thought you dumped the dog,no?
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GREENSPAN Q&A: PART II: Tax cuts, national debt
NEW YORK, July 28 (Reuters) - Following are excerpts from the question-and-answer session after the second leg of Federal Reserve Chairman Alan Greenspan's semiannual Humphrey-Hawkins testimony before the Senate Banking Committee on Wednesday:
SEN. PAUL SARBANES, D-MD: ''How would you know the circumstances later on would accommodate such large (tax) cuts and not raise inflation problems, particularly when all these projections are based on an economy that will continue to work at pretty high levels in terms of its use of its resources?''
GREENSPAN: ''I agree with that Senator. If the Congress decides to move forward and move into place significant tax cuts in the future years, I think it also has to be prepared to cut spending significantly in the event that the forecasts on which they are based are proved wrong.''
SARBANES: ''Or not to do the tax cuts?''
GREENSPAN: "That clearly is the alternative. What I am trying to say however, it is that implicit in moving forward with tax cuts when there are questions with respect to the sustainability of the budget surpluses, I would submit that Congress has got to be prepared to cut spending and not raise taxes back.
''The reason I say that is that if we are looking at the issues of sustainability and long-term economic growth, the one thing we don't want to do is to create tax patterns which are uncertain and variable.''
SARBANES: ''But wouldn't prudence therefore suggest that the best thing is to be cautious in all of these fields now that we for the first time are being confronted (with) what to do with a surplus?...We should tread lightly.''
GREENSPAN: ''I've been saying for nine months.''
SARBANES: ''If we can't reduce the national debt once we've got unemployment down to 4.3 percent, when would we be able to reduce national debt? Presumably if unemployment were to rise, then we would be confronted with assertions that we have to do something stimulative in order to bring down the unemployment. which of course, presumably, that would mean we would be draining off some of the surplus or running into a deficit depending on what our situation is. Isn't this the moment in a sense that we are concerned about working down our national debt, which I think everyone agrees certainly in current circumstances would strengthen the national economy? Isn't this the time to try to do that?''
GREENSPAN: ''Absolutely. I think this is the ideal time to do it...I can't imagine circumstances being more favorable to that reduction at this point.''
( -- N.A. Treasury Desk, 212-859-1660 ))
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