United States Treasury Secretary John Snow shrugged off concerns about the US’s deficit last week, insisting that a recovery in the world’s largest economy would help close the record gap between revenues and spending.
Speaking in London before meetings with the British Finance Minister Gordon Brown and Hans Eichel, the German Finance Minister, Snow said that, while the deficit was ”worrisome”, the White House was committed to controlling it.
”The deficit is bigger than it should be and we are not happy with that. But it is manageable in the sense that it is not perceived as disruptive.”
On Tuesday, the White House revealed that it is expecting the deficit to rise to $455-billion this year, the largest shortfall on record. As a share of the gross domestic product (GDP), the gap is likely to hit 6%, the highest level since the recession of the early 1990s.
His remarks came as Alan Greenspan, the chairperson of the US Federal Reserve, expressed further concern about the size of the deficit.
”No question, if we do not come to grips with these deficit issues, it will make it more difficult for us to maintain the type of growth rates, which … will bring total employment up and the unemployment rate down,” Greenspan told the Senate banking committee.
Greenspan clashed with the White House earlier this year when he warned that President George W Bush’s $700-billion tax cut package would add to the US’s fiscal problems.
While the White House believes the US will stack up a $15-trillion shortfall between 2001 and 2010, a private study commissioned by the US Treasury estimates that the deficit could climb to $44-trillion over that period.
Snow insisted the White House had the deficit under control. ”It’s not something that alarming but it is worrisome and we need to be firm in saying that it’s unwelcome.”
The Treasury secretary was upbeat about the economy’s outlook, predicting that a second half-year bounce back would take growth to above 3%. Next year, the Treasury expects the economy to expand by 4%, well above the levels predicted by private forecasters. — Â