Would Greenspan Endorse Bush's Tax Cut?

W A S H I N G T O N, Jan. 25 -- The stock market and the fledgling Bush administration are hoping Alan Greenspan will give them what they want today — some sort of stamp of approval to the president's tax cut plan and a clue on how much the Fed will cut rates later this month.

The Fed chairman is expected to reveal — in his usualveiled language — his position on President George W. Bush'scontroversial $1.6 trillion tax cut plan in testimony on"evolving fiscal challenges" to the Senate Budget Committee.

The world's investors will also rifle through his words forhints about how he sees the U.S. economy and clues aboutforthcoming rate reductions.

But opinions vary as to how far Greenspan might go if heshifts from his long-held position that paying down governmentdebt, not tax cuts, should be the top fiscal priority.

"I think he will come out in favor of at least a mild formof the tax cut package," said Anthony Chan, chief economist atBank One Investment Advisors in Columbus, Ohio.

"I don't think he will come out and support the entirepackage but he may provide at least some hints suggesting thatthere is room for at least some of the originally proposed $1.3trillion tax cut."

Watching and Waiting

Even though Wall Street has been abuzz for weeks with talkthat Greenspan could amend his position on taxes, if he doesmake even a partial about-face, it would raise eyebrows in thenation's capital.

Greenspan, whose wisdom on economic matters is respected byRepublicans and Democrats alike, does not make a habit ofshifting with every political wind.

The expectation that the chairman will break new ground inthe heated tax debate is not the only reason Wall Street iseagerly awaiting today's hearing. In talking of the budget,he would be hard-pressed to avoid the subject of the economy.And any phrase he utters on the current situation will bescoured for clues on interest rate direction.

This is the first testimony Greenspan has given in Congresssince September 21 last year, when he addressed the HouseCommittee on Education and the Workforce about the importanceof math and science education. Prior to that, he last appearedthere for the Fed's monetary policy report in July 2000.