Greenspan Steps Up Call to End Bush-Era Tax Cuts

Former Fed Chairman Alan Greenspan is stepping up his call for Congress to let the Bush-era tax cuts lapse.

In an appearance Sunday on ABC’s “Meet the Press,” Mr. Greenspan used his strongest words yet to urge lawmakers to let them expire. The risk of a U.S. debt crisis, he said, is just too big. Mr. Greenspan, who retired from the Federal Reserve in 2006, had endorsed the cuts back in 2001 championed by then-President George W. Bush.

“This crisis is so imminent and so difficult that I think we have to allow the so-called Bush tax cuts all to expire. That is a very big number,” he said, referring to how much the U.S. government could save from letting income taxes go back up to levels last seen under former President Bill Clinton.

Mr. Greenspan was talking about re-imposing the taxes for all Americans. The Treasury has estimated that a permanent extension of all the Bush tax cuts would cost $3.6 trillion over the next decade. Allowing taxes to increase on those in the top income brackets would take the cost to the government down to $2.9 trillion, according to White House estimates.

Ahead of meetings this weekend of world financial leaders, which included Treasury Secretary Timothy Geithner and current Fed Chairman Ben Bernanke, the IMF expressed concerns that a delay in slashing the U.S. budget deficit might cause the bond market to lose faith in the country’s ability to do so, which would push interest rates higher and possibly destabilize the global economy.

Mr. Greenspan said he was “far more optimistic” now that the U.S. will solve its fiscal problems than some months ago, pointing to recent moves by politicians on both sides showing openness to cut entitlement spending.

“We’re going to do it realistically. I hope sooner rather than later.”

Stil, when it came to the tax cuts, he sounded more alarmed than he was in August, when he said in an interview on NBC’s “Meet the Press,” that he disagreed with conservatives who said tax cuts essentially pay for themselves by causing more economic activity.

“They do not,” Mr. Greenspan said at the time, adding that the U.S. has been funding spending programs and tax cuts with borrowed money. “And at the end of the day that proves disastrous. My view is I don’t think we can play subtle policy here.”