Former Federal Reserve Chairman Alan Greenspan believes that the US should "follow the law" and let the Bush tax cuts lapse. He disagreed Sunday with Republicans who say that tax cuts pay for themselves.

"I am very much in favor of tax cuts but not with borrowed money," Greenspan said during an appearance on NBC.

"The problem that we've gotten into in recent years is that spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day that proves disastrous and my view is I don't think we can play subtle policy here," said Greenspan.

"You don't agree with Republican leaders who say tax cuts pay for themselves?" asked NBC's David Gregory.

"They do not," Greenspan replied firmly.

Greenspan's position will likely undermine effforts by congressional Republicans to extend the Bush tax cuts, a move that would cost the US anywhere from $2.2 trillion to $3.8 trillion over 10 years, depending on whose estimate you believe. The tax cuts expire at the end of this year.

Greenspan has been a hero to some conservative economic policymakers, who have in the past praised him for his work as Federal Reserve chairman, where he oversaw US fiscal policy from the Reagan era through the tech boom of the '90s. But many economists now fault Greenspan for his use of aggressively low interest rates after the 2001 recession. They say his fiscal policies created the asset bubble that caused the recent economic crisis.

Greenspan also warned Sunday that the US risks falling into a "double-dip" recession if the housing market weakens further.

“If home prices stay stable, then I think we will skirt the worst of the housing problem,” Greenspan said. “But right under this current price level, mainly 5, 7 or 8 percent below, is a very large block of mortgages, which are under water, so to speak, or could be under water. And that would induce a major increase in foreclosures, foreclosures would feed on the weakness in prices, and it would create a problem.”

This video is from NBC's Meet the Press, broadcast Aug. 1, 2010.

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