Greenspan on the Deficit

Back in 2001, Greenspan was a tentative supporter of tax cuts. In his now-famous (to fiscal policy wonks, anyway) remarks to the Senate Budget Committee of January 25, 2001, he basically said that he liked the idea of getting rid of the projected massive budget surplus through tax cuts – though he also endorsed the idea of making such tax cuts conditional on the surpluses actually materializing. In fact, Suskind’s book on O’Neill suggests that he thought that the tax cut as passed in May of 2001 was a mistake, since it left out the conditionality he wanted. Nevertheless, Greenspan’s qualified support of Bush’s proposed tax cuts in 2001 really gave them the impetus they needed to quickly become law.

This morning, Greenspan is scheduled to give another appraisal of the US’s economic situation before the House Financial Services Committee. Some reports have suggested that Greenspan is going to come down pretty hard on the current epidemic of fiscal irresponsibility emanating from the White House. It will be interesting to see what he says. Will he ignore the deficit problem, or tackle it head on? Who, if anyone, will he blame? What, if anything, will he recommend? Stay tuned for the answers…