But Greenspan said government estimates project more than enough surplus funds to pay off the debt and reduce taxes too. These projections have convinced him that it is sound to proceed with a tax cut now, said Douglas Lee, president of Economics from Washington, an economics consulting firm. He made it very clear that the changes that have occurred over the past year have made it much more likely that we would pay off the national debt much sooner. But Greenspan made clear that he does not view tax cuts as a way to jumpstart the economy. He said monetary policy, which governs interest rates, is a more effective tool than fiscal policy in fighting recession, noting that fiscal moves take a long time to take hold and face hurdles, such as the timing of Congressional approval.
Monetary policy can work almost instantaneously.
Greenspan said that if it became clear that politicians might be tempted to use the money for major spending initiatives, it would be better to cut taxes. Pages will open in a new browser window External sites are not endorsed by CNN Interactive. All Rights Reserved. Terms under which this service is provided to you. Read our privacy guidelines .