With the federal budget in surplus, in early 2001 the Fed chairman endorsed the principle of tax reduction, which led to the passage of tax cuts later that year. In September, facing a return to budget deficits, Greenspan warned representatives not to boost spending long-term.
"If things are bad enough that the Fed cut rates more than expected last week, I think he'll say some sort of fiscal stimulus is okay now," said Jim Glassman, chief US economist at J.P. Morgan Securities in New York.
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