Former Federal Reserve Chairman Alan Greenspan said tax cuts put in place by former U.S. President George W. Bush should be allowed to expire and the U.S. should return to tax rates that were in effect under former President Bill Clinton to help address the budget deficit.
We should “allow the Bush tax cuts to expire,” Greenspan said on NBC’s “Meet the Press” today, calling the economic crisis “imminent and dire.” We should “put the rates back to where they were during the Clinton administration,” he said.
Greenspan said it will be hard to rein in the budget deficit because data show that if a disproportionate amount of the change come from tax increases “it won’t work,” while the impact of cutting back on spending is “almost insignificant.”
“This issue requires a major cut in entitlement spending in order to resolve,” said Greenspan, who served as chairman of the Federal Reserve from 1987 to 2006. “It’s the issue that’s got to be confronted. We’ve got to deal with it realistically; I hope sooner rather than later.”
President Barack Obama has proposed cutting $4 trillion in cumulative deficits over 12 years through a combination of spending cuts and tax increases. The administration is resisting Republican calls for swifter cuts, while also pushing for a set of rules to enforce spending reductions over time.
The Republican-controlled House voted Friday to approve a budget that would cut spending by more than $6 trillion over a decade and privatize Medicare.
The proposal from House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, relies exclusively on spending cuts to reduce the deficit, slicing $6.2 trillion over 10 years from Medicare and scores of other programs including Medicaid, food stamps, farm subsidies and Pell college tuition grants.
Treasury Secretary Timothy Geithner said yesterday that the administration wants to limit spending without threatening the economic recovery. He said the U.S. economic outlook has “improved substantially” since October.