Alan GreenspanThe U.S. fiscal deficit is "scary" and the government should slash entitlement spending, former Federal Reserve Chairman Alan Greenspan said.

"We're involved in a dangerous game," Greenspan said, according to Bloomberg News.

The deficit may be a factor in low investment by U.S. companies, as it creates uncertainty about tax policies, Greenspan said in an opinion article for the Financial Times this week.

The U.S. needs an austerity program, Greenspan said. The former Fed chairman said that cutting budgets is a better way of reducing the deficit than raising taxes.

Still, Greenspan reiterated his support for letting the Bush tax cuts lapse. During the Bush administration, he was a key proponent of enacting the cuts.

Greenspan, 84, served as chairman of the Fed from 1987 until 2006.

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