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Greenspan mildly optimistic on economy

By William Neikirk

Chicago Tribune

WASHINGTON -- Federal Reserve Chairman Alan Greenspan said Wednesday the economy is poised to grow at a "noticeably better pace" now that the Iraq war is over, but he raised serious questions about the effectiveness of President Bush's proposed tax cut.

Although President Bush endorsed him for another term last week, Greenspan did not back away from his previously stated reservations about Bush's tax plan. Greenspan said the bigger deficits the tax cuts would cause could raise interest rates and retard future economic growth, undermining the purpose of the cuts.

Although he was cautiously optimistic about the economy, Greenspan's remarks before the House Financial Services Committee were tinged with uncertainty, saying he was unsure when the recovery would take hold and fretted about a somber mood holding back job-creating investment.

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But Greenspan said the economy was fundamentally sound despite its problems.

"I continue to believe the economy is positioned to expand at noticeably better pace than it has during the past year, though the timing and extent of that improvement remains uncertain," he said.

One comment Greenspan did not utter publicly but did include in a draft of his testimony appeared to reflect some concern about the government's ability to shift the economy into higher gear. "These remain challenging times for policy-makers," he wrote.

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