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Alan Greenspan: Let Bush Tax Cuts Die

Former Federal Reserve Chairman Alan Greenspan on Capitol Hill in  April 2010. J. Scott Applewhite/AP hide caption

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J. Scott Applewhite/AP

Former Federal Reserve Chair Alan Greenspan may no longer be the Maestro making all the economy's instruments play in harmony, if he ever could. But he still knows how to make a little news.

Greenspan is calling for Congress to let the Bush tax cuts die.

He hasn't all of a sudden become a liberal Democrat. Instead, according to Bloomberg News, Greenspan comes at his recommendation as a deficit hawk.

Greenspan, who as the nation's top central banker in 2001 and 2003, pushed for the Bush tax cuts, now says that was a mistake. He made the statement during the recording of a Bloomberg TV show that will run over the weekend.

My friend, Bloomberg reporter Mike Dorning, writes:

Former Federal Reserve Chairman Alan Greenspan, whose backing of George W. Bush’s 2001 tax cuts helped persuade Congress to pass them, said lawmakers should allow the reductions to expire at the end of this year.

“They should follow the law and let them lapse,” Greenspan said in an interview on Bloomberg Television’s “Conversations with Judy Woodruff,” citing a need for the tax revenue to reduce the federal budget deficit...

... Greenspan, in a telephone conversation after his Bloomberg TV interview was taped, said his position is that all the expiring Bush tax cuts should end, for middle-class and high- income families alike.

Ending the cuts “probably will” slow growth, Greenspan, 84, said in the TV interview. The risk posed by inaction on the deficit is greater, he said.

“Unless we start to come to grips with this long-term outlook, we are going to have major problems,” said Greenspan, who led the U.S. central bank from 1987 to 2006. “I think we misunderstand the momentum of this deficit going forward.”

How large an impact Greenspan's view on the Bush tax cuts will have is an open question. His political capital has fallen on Capitol Hill since he ended his 18-years plus tenure as Fed chair in 2006 and the start of the credit crunch the following year.

He has been faulted for contributing to the financial implosion through a blind faith in the self-correcting powers of capital markets, a faith he has since foresworn.

Still, if you want to end some if not all of the Bush tax cuts, as President Barack Obama says he does, Greenspan, a Republican, could prove a useful ally, providing  political cover for Democrats when Republicans accuse them of being tax and spend liberals.