The oracle as politician

Greenspan: He gives new president support for tax cuts but hedges by stressing debt-reduction.

January 27, 2001

LEAVE IT TO Alan Greenspan to confound his audience. Not only is he an economic oracle of Delphic proportions, he's a heck of a politician, too.

After spending eight years providing political cover for Bill Clinton and congressional Democrats to help them rid the country of deficit-spending, the Federal Reserve chairman is now giving President George W. Bush the cover he needs to push for a massive tax cut.

But Mr. Greenspan hedged his bet in testimony before Congress this week. Yes, he's now all for a large tax reduction, but "I still hold the No. 1 priority is reducing the debt," he said.

To dampen enthusiasm for Mr. Bush's $1.6 trillion tax cut, Mr. Greenspan noted that such action can't come quickly enough to ward off the impact of the current "very dramatic" economic slowdown that has brought national growth down "very close to zero."

Moreover, he's troubled by the shakiness of the government's 10-year surplus projections, and warned against rash actions.

In his typically elliptical way, he urged a go-slow approach: "The risk of adverse movements in receipts" -- a sharp plunge in tax revenues -- "is still real, and the probability of dropping back into deficit as a consequence of imprudent fiscal policies is not negligible."

Spoken like a true oracle. Translation: The president shouldn't go overboard in his tax cut and Congress shouldn't embark on spending binges.

Mr. Greenspan still fears a stalled economy, which could quickly change the nation's rosy outlook.

The truth is there's not enough surplus to do all the new president and Congress want to accomplish. Mr. Bush's proposed tax reductions soak up so much of the surplus there's insufficient cash left to pay for a missile defense system, fix Social Security and Medicare, set up a prescription drug program for seniors, implement education reforms, and attack other societal problems.

Mr. Greenspan is right to keep stressing debt reduction as the best way to prolong economic growth. Tax cuts now have his blessing, too, but Mr. Bush would be wise to heed the Fed chairman's warning that too much of a good thing could be bad news for the country.

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