US Federal Reserve Board chairman Alan Greenspan supports Minister of Finance Benjamin Netanyahu’s use of revenue surplus to reduce taxes, rather than the government debt. The Ministry of Finance said in a meeting between the two at the end of last week, Greenspan urged Netanyahu to retain tax cutting as his top priority.
Netanyahu presented to Greenspan the diverse opinions of economists in Israel regarding tax surpluses, and asked whether Greenspan though the surpluses should be used to cut taxes, or to reduce the government debt.
According to the Ministry of Finance, Greenspan answered, “You should continue cutting taxes, since this will both increase GDP and create good conditions for later reducing the government debt.” Greenspan stressed that the surplus revenue should definitely not be used to increase government spending.
Two months ago, Governor of the Bank of Israel David Klein recommended that Netanyahu halt his tax cutting, and use surplus revenue to reduce the government debt.
Greenspan praised Netanyahu’s economic policy, adding, “In an era of globalization, the test of an economy is the speed and flexibility of its response to rapidly changing situations. An overly inflexible policy will simply break. Such flexibility can be achieved by strengthening market forces, relaxing regulation, and fostering greater flexibility in the labor market.”
Published by Globes [online] - www.globes.co.il - on June 20, 2004