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This morning in an address before the US Senate's Committee on the Budget, Chairman of the Federal Reserve Bank Board of Governors Alan Greenspan announced that the rising estimates of US budget surpluses could allow space for tax reduction plans. Greenspan did not actually endorse President Bush's $1.6 trillion, ten-year tax cut plan, explaining that he did not think it would be appropriate for him to comment on "political decisions." Nonetheless, he was agreeable to some kind of tax reduction plan. Greenspan is a strong advocate of using budget surpluses to pay down national debt, but he said government estimates of the national surplus would allow for both debt relief as well as a tax cut for Americans. Greenspan, however, does not believe that tax cuts should be used as a weapon against the possibility of a recession. "I would not perceive of employing tax cuts to, in the sense, get in front of weakening forces which could eventually lead to a recession because history tells us it doesn't work"; instead monetary policy is a proven effective measure.
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