Federal Reserve chairman Alan Greenspan said today the US economy is growing at a reasonably good pace but said the country must tackle its budget deficits, primarily through spending restraint.
"Addressing the government's own imbalances will require scrutiny of both spending and taxes. However, tax increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base," Mr Greenspan said in testimony prepared for delivery to the House of Representatives Budget Committee.
"The exact magnitude of such risks is very difficult to estimate, but, in my judgment, they are sufficiently worrisome to warrant aiming, if at all possible, to close the fiscal gap primarily, if not wholly, from the outlay side."
Mr Greenspan reiterated his support for the idea of restructuring the Social Security retirement system to include personal investment accounts and urged Congress to reinstate lapsed rules requiring tax cuts and spending to be offset elsewhere in the budget.