Greenspan to Testify Before Congress

Federal Reserve Chairman Alan Greenspan is slated to testify before Congress this week, and his main task will be to create optimism about the economy’s direction in the face of possible war.

But Greenspan also must ensure he is not painted into a corner by one of the contending political visions of how best to spur a sluggish recovery, soon to be burdened with hefty bills from a new Iraqi campaign.

The chairman offers his semi-annual assessment of economic prospects before the Senate Banking Committee on Tuesday, and a day later, delivers what would probably be identical testimony to the House Financial Services Committee.

“He’s going to want to create a relatively optimistic picture by saying that ongoing geopolitical concerns are the primary obstacle to above-average growth,” predicted William Dudley, chief economist for Goldman Sachs in New York. “And then, when Iraq is resolved, hopefully relatively quickly, capital spending will pick up and things will look more rosy.”

That was essentially the assessment the Fed chief last offered, in a speech in New York in mid-December, and since then little has occurred to change that prognosis.

However, President Bush’s $695-billion, 10-year tax-cut program should offer lawmakers a whole new focus.