Washington – On the same day that Federal Reserve Chairman Alan Greenspan issued a fresh warning about the dangers of bloated budget deficits, Congress considered new tax breaks for the energy industry and an $81 billion measure to pay for U.S. military operations in Iraq and Afghanistan.
The events Thursday illustrated the challenges – “hard choices,’ as Greenspan put it – that policymakers face in trying to control spending.
Greenspan, who steadily has pressed lawmakers, told the Senate Budget Committee that unless the situation is reversed, the economy in the years ahead could “stagnate or worse.’
Meanwhile, the House neared passage of legislation that would give billions of dollars in benefits to energy industries.
The Senate approved an $81 billion measure for war costs in Iraq and Afghanistan.
Greenspan’s plea for fiscal fitness coincides with the deterioration of the government’s balance sheets.
In 2000, the government posted a record budget surplus. Four years later, there was a record deficit, $412 billion. The deficit this year is projected to come in at $427 billion.
Greenspan told senators that “the federal budget is on an unsustainable path,’ in which large deficits will lead to higher interest rates.
He repeated his support for a return to budgeting policies that would require Congress to offset future increases in government spending or new tax cuts with reductions in other government programs or tax increases.
