To Cut Deficit, Greenspan Now Favors Raising Taxes

Reverses long-held stance against taxes

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Former Federal Reserve Chief Alan Greenspan has switched sides. Long against tax increases, he has come to the conclusion that the Bush-era tax cuts--all of them--should be allowed to expire. He believes it is necessary both to exercise some restraint on the deficit and also to keep private investment from being crowded out, according to a story reported Wednesday by Reuters.

Calling the choice between raising taxes and not doing so "terrible" and "worse," Greenspan, who had supported the Bush tax cuts in 2001 and 2003, now says that allowing the deficit to expand is the "worst" choice, and it is better to raise taxes--even though he still believes in lower taxes--"but only in the context of bringing the deficit down."

"I am in favor for the first time in my memory of raising taxes," he said in an address at the Council on Foreign Relations in New York on Wednesday. He warned that the budget deficit was getting in the way of capital investment.

Held by some to be partially responsible for the housing bubble because of his monetary policies in the early 2000s, he was named No. 3 on Time magazine's list of people responsiblefor the financial crisis.

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