We Were Not All Wrong

No, Mr. Chairman. We were not all wrong:

Federal Reserve Chairman Alan Greenspan and Sen. Hillary Rodham Clinton (D-N.Y.) sparred today at a congressional hearing over whether Greenspan deserves some blame for helping to create the federal budget deficits that he regularly deplores.

Greenspan said today, “we were all wrong,” in early 2001 when government economists unanimously forecast ever-growing federal budget surpluses.

…”We need, in effect, to make the phantom ‘lock boxes’ around the trust fund real,” Greenspan said. He was referring to the idea in the late 1990s to create some mechanism to prevent Congress from spending surplus payroll tax revenue.

Clinton responded by recalling Greenspan’s January 2001 testimony urging Congress to cut taxes to avoid letting budget surpluses get too big. “Your testimony helped blow the lid off the lock box,” Clinton said.

Greenspan responded, noting that economists at the Office of Management and Budget, Congressional Budget Office and Federal Reserve all forecast growing surpluses at the time. “I did support tax cuts to reduce surpluses,” and “would recommend the same thing” today, if presented with the same information. Greenspan replied.

…Clinton alluded to her opposition to Bush’s 2001 tax cuts by adding, “Just for the record, we were not all wrong.”

Quite true.