- The Washington Times - Friday, January 26, 2001

Federal Reserve Chairman Alan Greenspan yesterday altered the political landscape of the tax-cut debate, Republicans on Capitol Hill and conservatives said yesterday.
In testimony before the Senate Budget Committee, the nation's chief banker said the federal government could be paying down the national debt too quickly.
The words were rhetorically shrouded and followed by a litany of caveats, but for a man who just last year said there was "zero" chance of paying off the federal debt any time soon, the comments were close to revolutionary.
"It makes it easier for Democrats to come on board and makes it very hard for Republicans not to support this," said Rep. Pat Toomey, Pennsylvania Republican.
Mr. Greenspan not only restated his preference for tax cuts over new federal spending, but added that burgeoning surpluses now may lead not only to paying down the federal debt, but eventually to an unhealthy accumulation of private assets by the government.
"He is not only giving us a strong endorsement of an immediate tax cut, but he's advancing a new dimension for the arguments for why," Mr. Toomey said.
Bob Stevenson, spokesman for the Senate Budget Committee, said budget surpluses as large as those projected mean "we are headed to tax cuts no matter what."
But, Mr. Stevenson said, "It's the difference between eloping and having your father's blessing. In this case, we have got his blessing."
Democratic reactions varied.
Sen. Charles E. Schumer, New York Democrat, called Mr. Greenspan's comments a mistake.
"While his statement on tax cuts was measured, it may be misinterpreted by more political souls," Mr. Schumer said. "I fear that Chairman Greenspan's comments could jeopardize our hard-earned deficit reduction gains by creating a snowball rolling downhill that even he can't stop."
Others simply downplayed the words' significance.
"I don't think this affects much," said one House Democratic leadership aide.
"Both sides got something from what he had to say," the aide said, noting that while Mr. Greenspan backed tax cuts, he also stressed the inaccuracy of budget projections and the need to be able to adjust tax cuts if surpluses failed to appear.
The Congressional Budget Office is expected to announce next week that federal revenues over the next decade will exceed federal expenditures by $5.7 trillion. Even after setting aside surpluses generated by Social Security and Medicare trust funds, there will be $2.7 trillion in excess revenues in the next 10 years, the CBO will predict.
Republicans and conservatives have long argued that the federal budget surplus will be large enough to both pay down the federal debt and allow a substantial tax cut, but Democrats pointed to Mr. Greenspan's previous statements that paying down the debt would be his first priority.
Yesterday's testimony changes all that, say tax cut advocates.
"It is amazing to see the power this one man has," said Christopher Wysocki, president of the Small Business Survival Committee.
Voters and shareholders pay attention to him, but more importantly "the markets listen to Greenspan," and lawmakers listen to the market, Mr. Wysocki said.
Mark Weinberger, director of national tax practice for Ernst and Young, said "Mr. Greenspan's imprimatur gives economic credibility to what to date has been labeled a political argument." That seal of approval, Mr. Weinberger said, gives tax cuts new momentum.
"The Democrats have been saying that Greenspan is against tax cuts and now he isn't," said John Feehery, spokesman for Speaker J. Dennis Hastert, Illinois Republican.
"This is a home run for the Bush tax plan," Mr. Feehery said.

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