AS FEDERAL RESERVE chairman for more than 15 years, Alan Greenspan has proved himself a master of the obtuse utterance -- what he once described as the art of incoherent mumbling.
In the course of attempting to guide the nation's economy alongside four presidents and through boom and bust, Mr. Greenspan also has been, by turns, an inflation-fighter, deficit hawk and, most recently, tax-cut booster.
Given that political agility -- and suspicions that he's sympathetic to the Republican tax-cut agenda -- his clear-cut challenge this week to the economic theory undergirding President Bush's latest budget and tax proposals was striking. It also was a welcome step back from the critical support Mr. Greenspan gave the president's earlier round of tax cuts two years ago.
True, in testimony before the Senate and House on Tuesday and yesterday, Mr. Greenspan endorsed a key element of the president's tax cuts -- his proposed gift to the well-off in the form of eliminating taxes on corporate dividends -- as good long-term policy.
But more critically, the Fed chief characterized the massive deficits spiraling off Mr. Bush's sweeping tax-cut proposals as "sobering" and predicted they couldn't be offset, as claimed by the administration, by resulting additional economic growth.
"Faster economic growth, doubtless, would make deficits far easier to contain," Mr. Greenspan said. "But faster economic growth alone is not likely to be the full solution to the currently projected long-term deficit. ... So, short of a major increase in immigration, economic growth alone cannot be safely counted upon to eliminate deficits and the difficult choices that will be required to restore fiscal discipline."
Mr. Greenspan advised that, given uncertainties from a potential war in Iraq, Mr. Bush's tax proposals are "premature" and, in any case, ought to be accompanied by budgetary restraint -- of the kind not being displayed by Mr. Bush and Congress.
To achieve that, he said, Congress ought to reinstate pay-go budgeting rules requiring the costs of tax cuts or spending increases to be met by parallel increases in other taxes or decreases in other spending.
In other words, we can't afford these tax cuts as things stand -- particularly as they would lead to bank-breaking federal deficits just as baby boomers' Social Security and Medicare needs kick into high gear in a decade or so.
Mr. Greenspan did not directly touch on the regressive nature of the president's tax proposals. Nor did he comment on the administration's long-term attraction to the radical notion of shifting the nation from a system that taxes income and investments to one that taxes consumption via sales and value-added taxes -- of which this budget proposal would only be a start.
But his semiannual performance before congressional committees was nonetheless so strong and clear that the Democrats' Senate leader, Tom Daschle of South Dakota, called it "a kiss of death" for the president's tax cuts. At the very least, it should serve as a wake-up call to Congress as to this serious threat to the future economic well-being of the vast majority of Americans.