Greenspan does the right thing

HEADNOTE

His proposal reduces taxes gradually as debt dwindles.

Several years ago I floated the idea that at the end of every fiscal year, the amount that taxes would be reduced would be tied to how much the surplus

had increased the previous year. If, for example, the surplus had risen $100 billion, taxes would be cut some proportion of that, say $70 billion. If in any given year the surplus had not risen, there would be no tax cut the following year. That had the additional benefit of forcing members of Congress to explain to their constituencies that there wasn't any tax cut this year because they voted for bigger spending increases.

Obviously that idea didn't get anywhere, but it was nonetheless interesting to hear Fed Chairman Alan Greenspan resurrect it in his Congressional testimony on Jan. 25. It still probably won't get anywhere; legislators don't like to be held that accountable. Nonetheless, this pay-as-you-go strategy, so to speak, is by far the most sensible approach. Apparently no government official can predict the budget surplus very far into the future; the underestimates of the surplus these days are not much worse than the underestimates of the deficit used to be in the 1970s and 1980s.