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WHAT GREENSPAN SHOULD HAVE SAID

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Federal Reserve Chairman Alan Greenspan was not as candid with Congress this week as he should have been.

Greenspan, the lead-off witness as Congress launched its first major review of Federal Reserve operations in more than a decade, testified that inflation can be eliminated over the next five years without a recession.But that can happen, Greenspan continued, only if Congress reduces the federal deficit.

True enough. What Greenspan did not say, however, is that the deficit is not likely to be reduced as long as Congress keeps putting shortsighted politics ahead of sound economic policies.

Consequently, as long as it's more popular to spend than it is to scrimp, America can expect to go on exercising insufficient control over its own financial destiny.

Admittedly, the job of cutting federal spending has become much tougher lately because of the unavoidable expenses resulting from hurricane Hugo and the San Francisco earthquake.

But even without such emergencies, Congress suffers a chronic shortage of the willpower needed to reduce the deficit. This failure of character can be seen in the games Congress keeps playing with the Gramm-Rudman law that mandated automatic, across-the-board spending cuts when this nation's lawmakers were unable or unwilling to make them more selectively.

For openers, the Gramm-Rudman law itself masks the true size of the deficit by ignoring federal borrowing from Social Security trust funds. On top of that, Congress put the savings-and-loan bailout off-budget even though it exerts a major drain on the public purse.

As a result, Americans can forget about a balanced federal budget by fiscal 1993 even though that goal is supposedly mandated by the Gramm-Rudman law. Even if that objective is somehow achieved, it likely will be done only on paper - a triumph of "creative accounting" over fiscal integrity.

It's this kind of blunt talk that Alan Greenspan should direct to Congress the next time he gets to testify on Washington's weak-kneed fiscal policy.