–Former Federal Chairman Says U.S. Has Been Too Slow To Fix Budget
–Greenspan: Can’t Fix Budget ‘Without Inflicting Economic Pain’
–Greenspan: Unclear If Crisis Will Hit Now, Or Is ‘Years Off’
–Greenspan: Overhauling Tax Expenditures Is Critical To Fiscal Fix

By John Shaw

WASHINGTON (MNI) – Former Federal Reserve Board Chairman Alan
Greenspan said Tuesday that American policymakers must take strong
fiscal action soon to avert a budget crisis in the U.S.

In testimony to a subcommittee of the Senate Finance Committee,
Greenspan said difficult fiscal times are ahead for the nation.

“I don’t know whether a U.S. budget crisis is immediately on the
horizon or is years off. What I do know is that if we presume that we
have a year or two before starting serious long-term restraint, and we
turn out to be wrong in that optimism, the impact on financial
markets could be devastating,” he said.

“If we are wrong in being overly fiscally cautious in the years
ahead, that is a problem that is readily solvable,” he added.

The former Federal Reserve Board Chairman said the U.S. has moved
far too slowly in tackling the fiscal pressures that will be caused by
the retirement of the Baby Boom generation.

“There is no credible scenario of addressing our current fiscal
problems without inflicting economic pain,” he said.

“We have been procrastinating far too long in coming to grips with
the retirement of the Baby Boomer generation, a fiscal problem that has
been visible for decades,” he added.

Greenspan said overhauling the tax code is a critical part of any
program of fiscal reform. He praised the Simpson-Bowles report for
outlining ideas for overhauling tax expenditures, which he said is
necessary.

These special provisions in the tax code, Greenspan said, “distort
the optimum functioning of markets, and ultimately, the standard of
living of society as a whole.”

Greenspan said he sees a sluggish American economy for some time to
come.

“The growth of our economy in the years ahead is bound to slow
… . In the years ahead, increasing entitlements will be pressing
against shrinking economic growth,” he said.

** Market News International Washington Bureau: 202-371-2121 **

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