Carper Questions Greenspan on Tax Policy

WASHINGTON, DC – Senator Thomas Carper today questioned Federal Reserve Chairman Alan Greenspan about the need for new tax cuts, wise use of the surplus, the role of the Federal Reserve in stimulating short-term economic growth and the possibility of recession. "I’ve sensed from your testimony today that you believe inflation remains at bay, and while we always want to be cognizant of it and mindful of it, it is not now an imminent threat to our economy," Carper said to the Chairman. "There are some who say, we ought to cut taxes now, and retroactively. There are others who say, that’s not appropriate, let’s let monetary policy work and we can phase in tax cuts a bit further down the line. Any help you can give us on that point? Greenspan responded that "recessions, when they occur, tend to more often than not be over reasonably quickly, and that the time frame for enacting tax legislation almost invariably is longer than that." Continuing his theme of bringing to Washington what works in Delaware, Carper also described to Greenspan the "Delaware Litmus Test" for tax cuts. "One of the things that we’re wrestling with within our own caucus, and I presume our Republican friends are as well, is a set of core principles on which tax cuts should be based," Carper said. "The four that we used in my state were the following: fairness, promoting economic growth, simplicity, and sustainability throughout the full business cycle and consistent with a balanced budget. Can you give us just a little guidance on the kind of principles, whether we’re Democrats or Republicans, that our tax-cut policy should be based on?" Greenspan responded by turning the question back to the Senator. "I think the Congress is confronted with the choice of whether in fact you give back what, in retrospect, turned out to be an unintended excessive level of receipts, or whether those are employed for other purposes. And these are the key judgments which I think in this particular debate are critical, and these are political judgments; these are judgments which only the Congress can make," he said.