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MONDAY, DECEMBER 5, 2005
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EDITORIAL

Greenspan speaks sense, even if it is a little vague

We're going to miss trying to decode Alan Greenspan when he steps down as chairman of the Federal Reserve at the end of January.

When Mr. Greenspan speaks, people listen — as the ads about E.F. Hutton used to say. But listeners have to be diligent because Greenspeak is often vague and nuanced — deliberately so, we suspect, because Mr. Greenspan wants to preserve his options as one of the most influential money people in government.

Mr. Greenspan was fairly clear, however, in remarks he made Friday about the United States' rising trade and budget deficits.

He told the Group of Seven finance ministers in London that the U.S. trade deficit could become "quite painful" for the world economy. He said, as reported by The New York Times, that countries with trade deficits should stop the "pernicious drift toward fiscal instability."

In a videotaped speech to the Philadelphia Federal Reserve Bank's policy forum, Mr. Greenspan said that the United States' budget position "will substantially worsen in the coming years unless major deficit-reducing actions are taken."

He called for the restoration of procedural restraints on federal budget-making, but added that "the fundamental fiscal issue is the need to make difficult choices among budget priorities." In other words, Washington policymakers must cut spending, no matter how painful that may be.

The nation may already have committed more resources to baby boomers for their retirement "than our economy has the capacity to deliver," he said. He urged changes, hinting at pushing back the retirement age.

Mr. Greenspan uses big words to express common sense: If you spend more money than you bring in, sooner or later you'll be in trouble. We hope that message outlasts his tenure as Fed chairman, and we hope politicians will start taking his advice seriously.

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