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White House Welcomes Greenspan as Tax Cut Backer
President George W. Bush welcomed Federal Reserve Board Chairman Alan Greenspan's testimony to Congress on Thursday as a show of support for cutting taxes ahead of the introduction of Bush's US$1.6 trillion tax cut plan.
"I was pleased to hear Mr. Greenspan's words. I thought they were measured and just right," Bush told reporters at the White House. "What Alan Greenspan was saying to the nation is that in order to make sure our economy grows, we've got to have good monetary policy and sound fiscal policy, a component of which is wise spending as well as tax relief."
Bush is preparing to introduce a 10-year, US$1.6 trillion plan to cut tax rates across the board. The plan was a major platform of his successful presidential campaign.
Administration officials have said they were considering accelerating the cut or making it retroactive to more quickly stimulate a slowing economy.
Greenspan told the Senate Budget Committee on Thursday that economic growth had slowed to a near standstill and that having a tax cut in place could do "noticeable good," should "current economic weakness spread beyond what now appears likely."
Greenspan appeared to signal more tolerance for a tax cut. He said there no longer appeared to be a trade-off between cutting taxes and reducing the federal debt.
Greenspan had maintained it was preferable to use budget surpluses to pay down the federal debt.
The Fed chairman declined to comment directly on Bush's proposed 10-year, across-the-board tax cut proposal.
Bush said he did not view the Fed chairman's statements as an endorsement of any specific strategy, including an accelerated or retroactive cut.
"I don't think Alan Greenspan was supporting any particular plan. I know he wasn't going to the (Capitol) Hill to say, 'Well, President Bush has got the right plan.' I felt like he was speaking about policy in general."
"I've got my view of how to enact tax relief. I suspect others in the Congress will have their views," the president added.
Bush spoke in the Cabinet Room before meeting with lawmakers on education.
The main importance of Greenspan's testimony was his reference to the benefit of tax cuts at a time of economic slowness, White House spokesman Ari Fleischer said. "Clearly Chairman Greenspan came out today and advocated that there is room for tax cuts, and Congress can cut taxes."
Former President Bill Clinton vetoed an across-the-board tax cut bill in 1999 and other measures the following year. Many Democrats remain opposed to the sweeping cuts advocated by Bush, and instead favor targeted cuts. But support for some kind of tax cut has grown as the economy has slowed.
"The most effective tax cut you can make to protect the economy in President Bush's opinion is a marginal across-the-board income-tax rate cut," Fleischer said.
Greenspan said, "I have always been in favor of reducing marginal rates as a means of employing taxes in a manner which was consistent with maximum efficiency of resources and their allocation in our economy."
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