Being Alan Greenspan

April 24, 2005

NOW HE tells us. Now that President Bush's historic tax cuts have piled up hundreds of billions of dollars in added federal debt in just a few years, Federal Reserve Chairman Alan Greenspan last week made an astonishing public admission to the Senate Budget Committee: that, in fact, he had erred four years ago in indicating this nation could afford these cuts.

Of course, he quickly added, many others thought that the budget surpluses of that time would last forever. And anyway, he said, the rest of his statements back then were much more cautious about those tax cuts, and so it's "frankly unfair" to portray him as having actually endorsed Mr. Bush's agenda.

Mr. Greenspan did not acquire the nickname the "Maestro" for nothing. In his 17 years as Fed chief, he has cultivated the high art of managing the economy in part by managing expectations, and one of his best tools has been his special talent at talking out of both sides of his mouth.

But as he approaches the end of his tenure in January, Mr. Greenspan's considerable accomplishments are dimmed by his failures to prick the late-1990s stock bubble and to stand up to Mr. Bush's fiscal recklessness.

So we're particularly glad that Maryland Democratic Sen. Paul S. Sarbanes was at the Senate hearing to speak the truth, reminding the "Maestro" that, indeed, his 2001 remarks were the equivalent of taking "the lid off the punch bowl" - essentially giving the green light for tax cuts. To his credit, Mr. Sarbanes characterized the Fed chief's position in the very same way back in 2001.

Now Mr. Greenspan is sharply focused on the budget deficits that his endorsement of tax cuts helped create. He's telling the nation that the government is spending too much, that Social Security and Medicare cuts are in the offing and, finally, that taxes might have to be raised. We couldn't agree more that the mounting federal budget deficits must be overcome with stiff fiscal discipline.

Meanwhile, Mr. Bush and his followers are still pursuing making permanent his record tax cuts, and just as when these were passed in 2001 and 2003, Mr. Greenspan is not offering any noticeable resistance. That would perhaps not be in keeping with the nature of the Fed chief's supposedly nonpartisan job. But then again, Mr. Greenspan has already shown himself willing to be used for political ends.

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