- The Washington Times - Thursday, March 17, 2005

To the discredit of both political parties, Congress has failed to pass a budget resolution during two of the previous three years: once when Democrats controlled the Senate (2002) and once when Republicans controlled the Senate (2004). In recent days, both bodies of Congress have been busily crafting their respective resolutions. One crucial and highly contentious budget-process issue involved the so-called PAYGO (i.e., pay-as-you-go) provision, which Congress first adopted in 1990 and extended numerous times until it was allowed to expire at the end of fiscal 2002.

PAYGO theoretically required Congress to enact spending cuts or revenue increases to offset any new entitlement programs or tax cuts. Beyond occasional subterfuge, overriding PAYGO normally required 60 votes in the Senate. This year, Democrats and a handful of Republicans in the Senate wanted to re-instate PAYGO and once again apply it to both entitlements and tax cuts. The White House and the vast majority of GOP legislators sought to apply PAYGO only to entitlements. The Senate rejected the bill on Wednesday by a 50-50 vote.

In the current political atmosphere of extreme partisanship, it is interesting to note that one influential Republican had vigorously backed the Democratic position. That person was Federal Reserve Chairman Alan Greenspan, whom Senate Minority Leader Harry Reid recently slandered by calling him “one of the biggest political hacks we have in Washington.”

On March 2, House Budget Committee Chairman Jim Nussle, noting Mr. Greenspan’s unwavering support for applying PAYGO to tax cuts, asked the Fed chairman during a hearing: “Why do you stick to this position, as you have very forcefully over the years?”

Mr. Greenspan’s reply is instructive to all of us, but especially to Mr. Reid and other Democrats: “I do so, Mr. Chairman, because I grant you if everyone believed as I do — and I realize you do — that the solutions of the budget problem [are] far more sensibly addressed on the outlay side, then it wouldn’t make much difference,” Mr. Greenspan explained. “But it is an arguable issue, and this is a democracy, and we do have differing views and differing people holding differing views. And compromise is essential in getting a functioning legislature to work its will. And I, in full recognition of that, and in recognition of the fact that there are people who don’t agree with either you or me on this issue, I think that we require [PAYGO] to be symmetrical [on entitlement spending and tax cuts], because it’s the principle that I think is involved here. Namely, you cannot continuously introduce legislation which tends to expand the budget deficit because down the road the impact of an ever-rising deficit, especially as a percent of GDP, creates a significant weakness in the structure of the economy. So, it’s not an issue of economics. It’s an issue of — if you want to put it that way — political economy.” Those were not the words of a “political hack.”

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