Greenspan's Warning on Deficit Ignores His Role in Its Growth

That's the only possible reaction to Federal Reserve Board Chairman Alan Greenspan's conclusion last week that the massive federal budget deficit accumulated under President Bush was "unsustainable." Declared Greenspan: "The principle that I think is involved here

That would be an entirely reasonable -- even urgent -- warning from someone who didn't bear so much responsibility for the problem he's describing. Greenspan lamenting higher deficits is like New York Yankees owner George Steinbrenner complaining about inflated baseball salaries.

Let's recap. When Bush was elected, the nation had enjoyed three consecutive years of federal budget surpluses under President Clinton. The Congressional Budget Office projected that the government was on track to amass surpluses large enough to pay off the publicly held national debt by 2008. That would make the nation debt free for the first time since the presidency of Andrew Jackson.

Greenspan had reliably supported this fiscal discipline under Clinton. But after Bush's election, Greenspan bent to the prevailing wind. Within days of Bush's inauguration, he gave his seigniorial blessing to tax cuts in testimony before the Senate Budget Committee.

As Bruce Bartlett, a leading conservative economist, wrote at the time: "With Greenspan's support

Greenspan built his argument for tax cuts in 2001 largely on his concern that the projected surpluses would be too large, allowing the government not only to extinguish the debt but also to accumulate financial assets, such as stocks and bonds.

That always seemed a dubious notion. But if that concern was legitimate, it seemed to be pretty well resolved by the time Bush came back for another tax reduction in 2003. The federal budget had already fallen back deeply into deficit under the weight of Bush's 2001 tax cuts, the economic slowdown and the cost of responding to the Sept. 11 terrorist attacks. Rather than falling, much less falling too fast, the national debt was rising again.

Against that backdrop, surely the great voice of fiscal restraint would counsel caution about burdening future generations with more debt through more tax cuts.

Well, sort of. Greenspan, to his credit, said the second round of tax cuts shouldn't be passed without offsetting spending reductions. But he never seriously pushed Congress to reconsider the initial tax cuts passed on the obsolete assumption of vast surpluses.