Greenspan supports tax cuts

Constant increases in projected future surpluses have caused Federal Reserve Chairman Alan Greenspan to change his fiscally conservative stance of debt reduction to include the goal of tax cuts. While many in Washington side with his new position, some believe it is irrational.\n"I never expected to see the day where I would be talking about anything other than reducing the debt … And so, have my views changed? Yes, they've changed; they have to change," Greenspan told the Senate Budget Committee Thursday.\nNow that Greenspan backs tax cuts, many expect at least some of President George W. Bush's $1.6 trillion in reductions to pass sometime this year. "Greenspan probably has more impact on the fate of a tax cut than the president of the United States," Mark A. Bloomfield, president of a business-financed tax reduction lobby, told The New York Times.\nGreenspan strongly supports a reduction in the marginal tax rates applied to income. Other popular reductions include ending the estate tax and marriage penalty and higher deductions for children.\nWhile Greenspan's backing of tax cuts has brought more political support toward their reduction, some on Capitol Hill believe his support will lead to excessive cuts and could lead to fiscal woes for the government. "He's taken the lid off the punch bowl … and once you take the lid off the punch bowl, you can't say you can only have half a cup," Senator Paul S. Sarbanes, D-Md., told The New York Times.\nThe opposition to Greenspan's new stance appears minimal -- even among Democrats, who historically oppose tax cuts, instead favoring increases in spending. In vague acceptance to Greenspan's change of views, Senate Minority Leader Richard Gephardt (D-Mo.) told the Washington Post, "The chairman pointed out that we must approach the surplus with caution … Democrats agree." Gephardt is considered one of the most influential politicians in Washington.\nGreenspan attributes his change of views to the seemingly ever-increasing budget surplus predictions. He said he believes the debt will be paid off sooner than he previously thought -- leaving the government awash with cash. He continued saying the only two options the government can do with the extra money -- after the government's debt is paid off and Social Security is depleted -- is to spend it or give it back in the form of lowered taxes.\nGreenspan told the Senate Budget Committee that any increase in government spending would be difficult to erase, even if a deficit arose. He said new spending programs could easily grow beyond their original scope, forcing unexpected increases in expenditures.\nIn contrast, lowered tax rates are easier to reverse and can be easily set to move with changes in future surplus or deficit predictions. This would help prevent tax cuts from getting out of hand. \nHe also said he believes that while lower taxes won't have much effect on today's current economic slowing, they would help prevent a prolonged recession. "Fiscal policy (taxes) is too blunt a tool to work as an anti-cyclical device." \nGreenspan said he believes tax cuts could help bolster or even increase consumer confidence, which has huge effects on their spending habits. In other words, tax cuts help support continued economic growth.\nNew estimates of the future surplus will be released this week and are expected to predict it to be even larger than previously calculated.