Fed Chief Backs Extension Of Bush Tax Cuts

by Mike Godfrey, Tax-News.com, Washington

16 February 2004

Testifying for a second day on the Federal Reserve's semi-annual monetary policy report, Fed chief, Alan Greenspan expressed his support for an extension of the $1.7 trillion tax cuts introduced by the Bush administration, which are set to start expiring at the end of the year.

However, he tempered this recommendation with a warning that the US government should reinstate caps on government spending in areas such as social security and Medicare, and should observe what are known as "pay-go" rules, whereby other areas of the budget are amended to pay for tax or spending plans.

"I am in favour...of continuing the tax cuts that are in dispute at this particular stage," Mr Greenspan announced last week. However, he went on to add that:

"It is crucially important that we try to find, wherever we can, reductions in outlays before adverting to the question of revenues to fill in the gap. I think that the budget deficit problem needs to be resolved primarily or fully on the expenditure side."

Democratic presidential candidate, John Kerry has called for a partial repeal of the tax cuts.

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