(CNSNews.com) - In what is being called by some a change of views, Federal Reserve Chairman Alan Greenspan told the Senate Budget Committee Thursday, a tax cut would do "noticeable good" for the American economy. His comments pleased many conservatives and the Bush Administration.
However, many committee members asked Greenspan about his flip-flop in views. He said that mounting budgetary surpluses are making it possible to both pay down the debt and cut taxes. Last year, Greenspan said his first preference was to pay down the debt and his second option was a tax cut.
``And so, have my views changed? Yes, they've changed. They have to change. I see no alternative to that,'' Greenspan said.
House Speaker Dennis Hastert (R-Ill) was pleased with Greenspan's testimony, saying it "confirmed that the path advocated by President Bush and the Republican Congress is the right one: fiscal discipline combined with tax relief will keep our economy growing."
"Chairman Greenspan makes it clear that we can enact the President's tax proposal and follow a responsible budget that will pay off the public debt," Hastert said.
House Republican Leader Dick Armey (R-Texas) said Greenspan's testimony has "dramatically changed the tax debate. Prospects for tax relief this year just went way up."
"His endorsement of tax relief is good news for overtaxed Americans and bad news for those who want to spend the surplus. Chairman Greenspan is right. If the surplus stays in Washington, it will be spent. I'm more confident today that Congress will enact the President's tax relief proposal," Armey said on Capitol Hill.
Greenspan's comments also pleased Bush Administration officials as well.
White House spokesman Ari Fleischer said "we hope that the Congress will join President Bush and Chairman Greenspan in cutting taxes and passing the Bush tax cut so we can protect the strength of our economy. What is most important is to protect the economy."
Certain tax cuts, according to Fleischer are needed in order to "protect" the economy.
"There is no reason that people should pay a tax upon death. The death tax should be abolished. There is no reason that married people should pay higher taxes simply because they say I do. We should reduce the marriage penalty," Fleischer said.
Fleischer also said Greenspan mentioned another "interesting note" in his testimony as well.
"There is a new reason that taxes need to be cut and that is, if you don't cut taxes and if these surpluses continue to mount, the government will sit on an amount of excess accumulated cash. Chairman Greenspan has warned against excessive buildups of this type of cash. Either it gets spent or it gets used to cut taxes and clearly no one wants to spend that money on bigger government," Fleischer said.
"The problem with Washington", Fleischer explained, "is that once Congress and Washington spend the money, they don't stop spending it. The other problem with Washington is [they] try to keep raising taxes in solutions to problems and it's another reason we need to cut taxes."
The Americans For Tax Reform was pleased with Greenspan's testimony.
"We're happy that Federal Reserve Chairman (Alan) Greenspan has endorsed tax cuts and warned about increased government spending," said ATR spokesman Chad Cowan.