Alan Greenspan offered support to the US President’s plan for a tax overhaul, backing the idea of taxing consumption rather than spending. The savings rate in the nation has dropped to 1% in 2004, alarming the policy makers.

Greenspan admitted that the current tax code is too complicated but warned against drastic changes.
"Getting from the current tax system to a consumption tax raises a challenging set of transition issues," he said.

Greenspan favors the transition to a mixed system, similar to the current tax-free savings accounts.
Influential Fed chief also backs the plan for the privatization of Social Security accounts, advanced by the Bush Administration.

"I believe that as the baby-boom generation begins to retire in a few years, it will become increasingly important for the nation to boost resources available in the future through greater national saving," he said.
Greenspan’s criticism on the budget deficit did not satisfy the Democrats who expected him to crack down on the administration’s spending policies.

"Why doesn’t he respond to the Republicans and tell them the big problem here is the debt that this administration [has] created?" said Senate Minority Leader Harry M. Reid (D-Nev.). "We had a $7 trillion-dollar surplus when Bush took office. Now we have a $3 or $4 trillion-dollar deficit. That’s, in fact, what Greenspan should be telling people."