Friday, March 11, 2005

Greenspan Says Federal Budget Deficits Are 'Unsustainable'

Greenspan Says Federal Budget Deficits Are 'Unsustainable'

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WASHINGTON, March 2 - Alan Greenspan, chairman of the Federal Reserve, warned on Wednesday that the federal budget deficits were "unsustainable," and he urged Congress to scrutinize both spending and taxes to solve the problem.Mr. Greenspan also warned that the deficits could be driven sharply higher by costs connected to the aging of the baby boom generation, particularly entitlement programs like Social Security and Medicare.

While reiterating his support for President Bush's plan to offer private accounts as part of overhauling Social Security, Mr. Greenspan urged lawmakers to tackle the program's problems now, rather than later.Though Mr. Greenspan has made similar pleas in the past, he spoke more urgently on Wednesday and disagreed more adamantly with Republican lawmakers and Mr. Bush, who have steadfastly refused to put restrictions on new tax cuts."

Addressing the government's own imbalances will require scrutiny of both spending and taxes," Mr. Greenspan told members of the House Budget Committee."When you begin to do the arithmetic of what the rising debt level implied by the deficits tells you, and you add interest costs to that ever-rising debt, at ever-higher interest rates, the system becomes fiscally destabilizing," he told lawmakers.

White House officials played down Mr. Greenspan's remarks, noting that he had placed top priority on reduced government spending and that Mr. Bush had vowed to reduce the budget deficit by half by 2009.That would come on top of a rapid escalation in the federal debt from $3.4 trillion to $4.3 trillion as a result of soaring annual deficits since 2001.

None of Mr. Bush's big tax cuts are scheduled to expire this year, but the 2003 tax cuts on stock dividends and capital gains are to expire in 2008, and the other big tax cuts are all to expire by the end of 2011.Making all of those tax cuts permanent, as Mr. Bush wants, would add about $1.8 trillion to the federal debt over 10 years, the nonpartisan Congressional Budget Office says.
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