Federal Reserve Chairman Alan Greenspan on Thursday lent support to a White House bid to make $1.7 trillion in tax cuts permanent, telling Congress spending control was the best way to cut the budget gap.
"I am in favour ... of continuing the tax cuts that are in dispute at this particular stage," the influential central bank chief told the Senate Banking Committee, wading into a contentious election-year debate.
"I would argue strenuously that it should be taken out on the expenditure side."
Greenspan echoed White House arguments that tax hikes could hit the economy, saying: "It is crucially important that we try to find, wherever we can, reductions in outlays before adverting to the question of revenues to fill in the gap."
In the formal part of his testimony, which he delivered first on Wednesday before a House of Representatives panel and repeated on Thursday, Greenspan warned of both short- and long-term dangers posed by record budget deficits.
Since taking office, President George W. Bush has won tax cuts totalling some $1.7 trillion over 10 years. But some of the reductions expire at the end of this year and all run their course by the end of the decade.