Greenspan Expected To Be Upbeat On Economy

by Leroy Baker, Tax-News.com, New York

16 July 2003

Federal Reserve Chairman Alan Greenspan will commence his semi-annual Congressional testimony on the prospects for the US economy this week, and is expected to inform lawmakers that tax cuts and low interest rates have left the nation well placed for a recovery this year.

Mr Greenspan's task will be made a little difficult, however, by recent disappointing economic indicators: unemployment hit a nine year high of 6.4% last month, and some economists are arguing that GDP growth forecasts for 2003 will be revised down from 3.5% to 2.5%.

Nevertheless, research by Blue Chip Economic Indicators has revealed that the recently enacted tax cuts will boost the incomes of those in work by an average of 7.9% in the third quarter of this year, according to a Bloomberg report. Whether this will translate into higher levels of consumer spending remains to be seen, but many observers believe that the spare cash will either be saved or used to pay off existing debts, therefore having no direct impact on the economy. A recent Gallup poll also indicated that a higher than expected percentage of Americans, particularly those on lower incomes, are not anticipating larger pay packets as a result of the tax cuts.

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