Federal Reserve Chairman Alan Greenspan on Thursday voiced support for extending US President George W. Bush's tax cuts, but told lawmakers they should reinstitute rules to ensure they don't drive up the country's debt.
The influential central bank chief recommended finding savings on the spending side to pay for the cuts, and suggested Congress consider scaling back retiree benefits under Social Security and Medicare.
"I am in favor ... of continuing the tax cuts that are in dispute at this particular stage," Greenspan told the Senate Banking Committee in answer to a lawmaker's question, wading into a contentious election-year debate.
Since taking office, Bush has won tax cuts totaling some US$1.7 trillion over 10 years. Unless extended, the reductions will begin expiring at year's end, fully running their course by 2010.
The Fed chairman said he would "argue strenuously" for saving on the spending side to fund an extension. The cost of making the cuts permanent could top US$1 trillion over the next decade.
Testifying for a second day on the Fed's semiannual monetary policy report, Greenspan twinned his backing for tax cuts with a call for renewing expired caps on government spending and so-called pay-go rules, which require tax or spending plans be paid for elsewhere in the budget.
The Bush administration also supports pay-go renewal, but only for spending programs -- not for tax cuts.
Greenspan also urged lawmakers to look closely at Social Security and Medicare. Both programs will come under growing stress as members of the baby boom generation begin to retire.
"I suspect ... we're going to have to relook at some of the entitlement spending outlays," he said. "What we have to do, as difficult as it's going to be, is to relook at some of these commitments that were made."
Greenspan said Congress should consider raising the age at which benefits could be drawn under Social Security and Medicare and tie benefits to an inflation index that advances more slowly than the government's Consumer Price Index.
The Fed chief said he was aware politically difficult choices would be required to put the programs on a sound long-term fiscal footing, but added: "The other alternative is to have legislation which repeals the laws of arithmetic."
Absent a fix, Social Security will begin to pay out more than it collects in taxes by 2018, exhausting its trust fund by 2042. The Medicare program faces similar pressure, with its hospital trust fund projected to run out by 2026.
"Greenspan is more directly linking the trade-off between the tax cut on the one hand and Social Security benefits on the other than I think I've seen from him before," said Brookings Institution economist Peter Orszag, an adviser to the campaign of Democratic presidential front-runner Senator John Kerry.
"The only way you could pay for these tax cuts through lower Social Security benefits would be to reduce benefits for current beneficiaries and those about to retire, a step the Bush administration has specifically ruled out," Orszag said.
Bush's push to make the tax cuts permanent faces stiff opposition from Democrats who say they are skewed toward the wealthy. Kerry has called for their partial repeal.
Greenspan echoed the White House's arguments that letting the tax cuts expire would amount to a tax increase that could hit economic growth.
US President Donald Trump yesterday announced sweeping "reciprocal tariffs" on US trading partners, including a 32 percent tax on goods from Taiwan that is set to take effect on Wednesday. At a Rose Garden event, Trump declared a 10 percent baseline tax on imports from all countries, with the White House saying it would take effect on Saturday. Countries with larger trade surpluses with the US would face higher duties beginning on Wednesday, including Taiwan (32 percent), China (34 percent), Japan (24 percent), South Korea (25 percent), Vietnam (46 percent) and Thailand (36 percent). Canada and Mexico, the two largest US trading
ACTION PLAN: Taiwan would expand procurement from the US and encourage more companies to invest in the US to deepen bilateral cooperation, Lai said The government would not impose reciprocal tariffs in retaliation against US levies, President William Lai (賴清德) said yesterday, as he announced five strategies to address the issue, including pledging to increase Taiwanese companies’ investments in the US. Lai has in the past few days met with administrative and national security officials, as well as representatives from various industries, to explore countermeasures after US President Donald Trump on Wednesday last week announced a 32 percent duty on Taiwanese imports. In a video released yesterday evening, Lai said that Taiwan would not retaliate against the US with higher tariffs and Taiwanese companies’ commitments to
CHIP EXCEPTION: An official said that an exception for Taiwanese semiconductors would have a limited effect, as most are packaged in third nations before being sold The Executive Yuan yesterday decried US President Donald Trump’s 32 percent tariff on Taiwanese goods announced hours earlier as “unfair,” saying it would lodge a representation with Washington. The Cabinet in a statement described the pledged US tariffs, expected to take effect on Wednesday next week, as “deeply unreasonable” and “highly regrettable.” Cabinet spokeswoman Michelle Lee (李慧芝) said that the government would “lodge a solemn representation” with the US Trade Representative and continue negotiating with Washington to “ensure the interests of our nation and industries.” Trump at a news conference in Washington on Wednesday announced a 10 percent baseline tariff on most goods
‘SPECIAL CHANNEL’: Taipei’s most important tasks are to stabilize industries affected by Trump’s trade tariffs and keep negotiations with Washington open, a source said National Security Council Secretary-General Joseph Wu (吳釗燮) arrived in the US for talks with US President Donald Trump’s administration, a source familiar with the matter said on Friday. Wu was leading a delegation for a meeting known as the “special channel,” the Financial Times reported earlier. It marked Trump’s first use of the channel since returning to the White House on Jan. 20. Citing a source familiar with the matter, the Financial Times reported that Minister of Foreign Affairs Lin Chia-lung (林佳龍) was also a part of the delegation. The visit came days after China concluded war games around Taiwan and amid Trump’s