Greenspan certainly supports the president’s tax policy, but only to a limit.
Sen. John McCain once joked that he would vote to keep Alan Greenspan on the job even if the Fed chairman were dead.

That’s how revered and beloved Greenspan is.

McCain isn’t alone. Former Vice President Al Gore considers himself to be Greenspan’s biggest fan.

The chairman enjoys widespread support across the political divide and the president announced last week he intends to re-nominate the 77-year-old to another term, an indicator that the president trusts in Greenspan’s abilities.

President Bush must now listen to the chairman’s well-seasoned economic advice.

On Wednesday, Greenspan told Congress that the less-than-expected federal tax revenue and increased government spending argue against deep tax cuts. That with such a large deficit, and one that is expected to grow by another $80 billion, the tax cuts proposed by the Bush administration could have a destabilizing effect on the economy.

As the war in Iraq winds down, the economy, Greenspan explained, is now positioned for growth and tax cuts – which chills government’s revenue stream -will not help. In fact, if the federal deficit doesn’t level out, there may be no choice but to increase interest rates. In turn, that would reduce consumer spending, dampen borrowing and curtail job growth.

Greenspan certainly supports the president’s tax policy, but only to a limit.

He supports erasing the tax on stock dividends, but only if matching spending cuts are made.

Spending isn’t being slowed. In fact, it’s on the rise as we enter the reconstruction phase in Iraq.

And, as Greenspan correctly points out, the Baby Boomers are ever closer to retirement age, which will further tap government resources as their incomes drop off and they apply for Social Security and take advantage of Medicare benefits.

Sen. Olympia Snowe made similar arguments weeks ago and has been under fire for her position. But she is right, and Greenspan now backs her up.

We urge Snowe to remain strong in fighting tax cuts greater than $350 billion and we urge Sen. Susan Collins to get in the fight, too.

The president has made it clear that if he doesn’t get his desired $550 billion tax cut package now, he’ll come back to Congress and try again later this year.

The chairman of the Federal Reserve Board has made it clear that aggressive tax cuts will hinder economic growth.

Given the level of experience in economic matters between these two leaders, Greenspan’s recommendations carry greater weight.


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