Alan Greenspan vs. the Republicans

Tax cuts: Fed chairman joins voices against overstimulating an already prosperous economy.

July 28, 1999

AT THE RATE they are going, Republicans in Congress soon won't have any allies left. For some reason, they continue to push ahead in their foolish quest for an $800 billion tax cut.

Polls show folks much prefer spending the federal surplus on shoring up Social Security and Medicare, paying down the nation's debt and investing in education, the environment, health care and defense. Tax cuts are near the bottom of their list.

President Clinton promises a veto of the Republican plan for much the same reason. Congressional Democrats oppose the plan, too. And a handful of moderate Republicans, including Maryland Rep. Constance A. Morella, have had the courage to denounce the GOP tax-cut plan as a danger to the nation's long economic boom.

But if the GOP arrogantly refuses to believe any of those people, they ought to listen to Federal Reserve Chairman Alan Greenspan (hardly a liberal), who engineered the country's prosperity and is now chiding the party's tax-cut lust.

"I'm saying hold off a while," Mr. Greenspan told a congressional panel last week, noting that "the timing is not right."

Mr. Greenspan knows better than anyone that a massive tax cut would be counterproductive, overstimulating an already booming economy. This, in turn, would force the Fed to raise interest rates to prevent a return of inflation.

It also would leave no money to pay down the nation's debt, which Mr. Greenspan says would be "an extraordinarily effective force for good in this economy."

Another aspect of the GOP plan troubles the Fed chairman: Tax cuts work best when a stumbling economy needs a boost.

The boom will end some day, Mr. Greenspan said, and that's when large cuts "might be a very useful and timely vehicle to sustain an economy which is otherwise weakening."

Republicans should heed the advice of the nation's most respected economist. The surplus offers far better opportunities than trying to curry favor with voters.

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