Alan Greenspan Not Enthusiastic About Bush Tax Cuts

13 February 2003 Giving testimony to the Senate Banking Committee on Tuesday, Federal Reserve Chairman Alan Greenspan was lukewarm on President Bush's tax cutting plans, arguing that such economic stimulus is premature.

Although the Fed chief announced that he supports the centrepiece of the President's plan, namely the abolition of taxation on corporate dividends, he called for a return to the 'Paygo rule', which expired last year and stipulated that every dollar of new spending or tax cuts should be matched by a dollar of spending cuts or tax increases.

Speaking to the Senate Banking Committee, Mr Greenspan suggested that the government was wrong to downplay the importance of the projected 3% budget deficit, arguing that deficits which exceed 1-2% of gross domestic product risk destabilizing the balance between national debt and GDP.

Responding to Mr Greenspan's warning this week, recently appointed Treasury Secretary, John Snow announced that: 'If there is a disagreement, I would make the bet on boosting the economy now because the economy isn't as strong as we would like.' However, he admitted that he had not heard the Federal Reserve Chairman's testimony.