Washington, Sept 13: Federal Reserve Chairman Alan Greenspan said on Thursday the US economy has weathered shocks from falling stockmarkets, lower investment and the September 11 attacks so far, but he warned a swift return to government spending discipline was vital for economic health. In a testimony that admonished Congress to refocus on spending restraint, Greenspan said a return to prolonged budget deficits risked pushing interest rates higher, imperiling long-term prospects.


"To date, the economy appears to have withstood this set of blows well, although the depressing effects still linger and continue to influence, in particular, the federal budget outlook," the Fed chief told the House of Representatives Budget Committee.

Greenspan said he still thought last year's tax cut package -- the idea of which he backed at the time and which has been held by some to be partly to blame for the worsening budget outlook -- had been the right move.
In addition, he said he did not favor freezing additional reductions included in the 2001 proposals despite the recent erosion of the budget picture. Bureau Report