Greenspan Warns Congress to Control Deficit
WASHINGTON—New Hampshire Sen. John Sununu and Rep. Jeb Bradley said Tuesday they agreed with Federal Reserve chairman Alan Greenspan that Congress must, in the face of current “geopolitical risks,” regain discipline in the budget process to eliminate deficit spending and foster long-term economic growth.
Sununu and Bradley both said there is “no question” that the country’s economic situation is being affected by current foreign policy, including mounting international tensions over a possible war with Iraq. While consumer spending has increased, Sununu said, risk and uncertainty make businesses wary of investing.
Greenspan, testifying Tuesday before the Senate Banking, Housing and Urban Affairs Committee, said the intensifying situation “makes discerning the economic path ahead especially difficult.
“If these uncertainties diminish considerably in the near term, we should be able to tell far better whether we are dealing with a business sector and an economy poised to grow more rapidly—our more probable expectation—or one that is still laboring under persisting strains and imbalances that have been misidentified as transitory.”
Greenspan said, however, that economic growth alone “cannot safely be counted upon to eliminate deficits and the difficult choices that will be required to restore fiscal discipline.”
Sununu—a junior member of the Banking Committee—said he supports extending spending restraints on the budget, a measure Greenspan also discussed, to help control government spending and deficit growth.
“We have to recognize that strong growth is important to closing the deficit in the long run,” Sununu said in an interview. “Encouraging economic growth and controlling the growth in government spending—those should be in the forefront of the budget debate.”
Policy changes that encourage long-term economic growth, such as President Bush’s proposal for a dividend tax cut, are more sensible than short-term stimulus proposals, Sununu said.
“We should be looking to create a tax cut that’s fair and encourages long-term economic growth,” Sununu said. “There’s very little that the federal government can do that would affect economic growth three or four months from today.”
Bradley, in a separate interview, argued that temporary deficit spending may be necessary to maintain the resources necessary to protect Americans.
“I’m not . . . as troubled about expansion of the deficit in the short term in order to provide safety and protection for Americans and to get the economy back on track,” Bradley said. “I think Mr. Greenspan does make the point that we’ve got to keep a very watchful eye on spending, and that’s really the flip side to this.”
Bradley also said he supported the president’s proposed tax cuts, which drew fire yesterday from hundreds of economists—including University of New Hampshire professor Richard England—who said in a statement that the dividend cut “is not credible as a short-term stimulus” and “will worsen the long-term budget outlook, adding to the nation’s projected chronic deficits.” England could not be reached for comment Tuesday.
Still, Bradley said the president’s budget does provide short-term stimulus in that it would accelerate tax rates, reduce the so-called marriage penalty and increase the child-care credit. Bradley added that the dividend tax cut, as well as an emphasis on savings, are intended to encourage long-term growth.
“The dividend tax cut is good policy,” Bradley said. “It’s fair, millions of Americans of all economic classes are going to benefit from it and also it’s going to really help long- term growth in this country.”
In a statement released Tuesday, Rep. Charlie Bass said he also agreed with Greenspan, and added that Congress should limit spending on “other government programs” to control the deficit.
“Tax cuts should . . . be considered to help provide solid economic growth,” Bass said. “While a slow economy and war are certainly reasons to expect short-term deficits, they definitely should not be used as excuses to throw all fiscal restraint out the window.”
Published in The Manchester Union Leader, in New Hampshire.
