WASHINGTON – Federal Reserve Chairman Alan Greenspan and former Treasury Secretary Robert Rubin told tax-writing senators Tuesday that any plan using tax cuts to stimulate the struggling economy should be large enough to be effective, possibly as much as $100 billion.
Meeting privately with the Senate Finance Committee, Greenspan and Rubin agreed that a stimulus amounting to 1 percent of the nation's gross domestic product would be a proper benchmark, according to senators and aides who attended the meeting.
There was also general agreement among the Democrats and Republicans that any stimulus should be temporary, perhaps limited to two or three years, to guard against negative long-term effects such as federal budget deficits and higher home mortgage rates.
"I think it has to be temporary but significant enough to make a difference," said Sen. Charles Grassley of Iowa, ranking Republican on the Finance Committee.
No decisions were made about which specific tax breaks to pursue or even whether to proceed with a stimulus plan at all. But the $100 billion figure is much higher than lawmakers had been suggesting last week, when Greenspan first urged Congress not to rush out a proposal in the aftermath of the terrorist attacks that might have uncertain consequences.
At the White House, spokesman Ari Fleischer said President Bush was still weighing whether to back a stimulus plan. "It remains under review," he said.
Sen. Max Baucus, chairman of the Finance Committee, said the $100 billion would be in addition to spending or tax actions that Congress has already taken, including a $15 billion aid plan for the nation's airlines, $40 billion in emergency spending related to the attacks and $40 billion in tax rebate checks from the 10-year, $1.35 trillion tax cut enacted this year.
"There's a lot of economic stimulus already in the pipeline," said Baucus, D-Mont.
Baucus and Grassley said that Greenspan also repeated that lawmakers should wait for more economic data before deciding on whether a tax cut is needed to either boost consumer confidence or spur investment and business activity. Both senators agreed with the go-slow approach.
"These are different times," Baucus said. "We have to think a little more deeply here."