01/25 10:02
Greenspan Says Tax Cuts Appear Required Over the Next Few Years
By Noam Neusner and Michael McKee
Washington, Jan. 25 (Bloomberg) -- Federal Reserve Chairman Alan Greenspan said rapidly rising federal budget surpluses will allow the U.S. Congress to consider ``surplus-lowering policy initiatives,'' and indicated he supports some tax reductions soon.
``The sequence of upward revisions to the budget surplus projections for several years now has reshaped the choices and opportunities before us,'' said Greenspan in the text of testimony to the Senate Budget Committee. He said rising surpluses mean the federal debt will be gone by the end of the decade.
``In today's context, where tax reduction appears required in any event over the next several years to assist in forestalling the accumulation of private assets, starting that process sooner rather than later likely would help smooth the transition to longer-term fiscal balance,'' Greenspan said.
In prior appearances on Capitol Hill, Greenspan has made clear that he favors debt reduction as the best method for promoting savings and keeping interest rates low. He has been less supportive of tax cuts, and has said he favors them only if the other choice is more government spending.
Today, he said, ``the tradeoff faced earlier appears no longer an issue. The emerging key fiscal policy need is to address the implications of maintaining surpluses beyond the point at which publicly held debt is effectively eliminated.''
Greenspan called a rise in spending initiatives at the end of last year's Congressional session ``troubling, because it makes the previous year's lack of discipline less likely to have been an aberration.''
Greenspan urged Congress to take advantage of the improved outlook for the surplus to ``consider a budgetary strategy that is consistent with a preemptive smoothing of the glide path to zero federal debt or, more realistically, to the level of federal debt that is an effective irreducible minimum.''
Greenspan said improved worker productivity has led to the improved budgetary outlook, and said that those gains ``are more than transitory,'' even amid a ``pronounced weakening'' in economic growth. Greenspan didn't discuss his outlook for the economy or monetary policy, though he said that tax cuts shouldn't be viewed as a strategy of dealing with that slowdown.
In addition, Greenspan said the U.S. government should avoid owning private assets, although with rising surpluses, that may be ``difficult to avoid.'' |
