Greenspan Says He Expects Tax Increases. - And President Bush, as head of the borrow & spend party, thought there was such a thing as free lunch.

Federal Reserve Chairman Alan Greenspan said yesterday, for the first time explicitly, that he expects tax increases to be part of any eventual agreement to reduce the federal budget deficit.

Greenspan, appearing before the Senate Budget Committee, also acknowledged that his support for tax cuts in early 2001 unintentionally led to policies that helped swing the federal budget from surplus to deficits. In pointed comments, Greenspan addressed recent Democratic critics who have sought to blame him for the return to deficits.

The deficit hit a record $412 billion last year and is projected to expand dramatically as the huge baby boom generation starts retiring and collecting Social Security and Medicare benefits.

"The federal budget deficit is on an unsustainable path, in which large deficits result in rising interest rates and ever-growing interest payments that augment deficits in future years," Greenspan said in his prepared testimony yesterday.

Greenspan has frequently said he would prefer the deficit be shrunk as much as possible through spending cuts -- including reductions in Social Security and Medicare benefits -- before taxes are increased. He said yesterday that he believes raising taxes restrains economic growth and that there is "no way you can raise tax rates enough" to cover future spending commitments.

Republican congressional leaders have ruled out tax increases to shrink the deficit anytime soon. On the contrary, they are pushing to extend President Bush's expiring tax cut provisions and to pass new tax breaks for energy companies.

(4-22-05, The Washington Post.)