The Fed chief called for "major deficit-reducing actions" and proposed several procedural steps Congress could implement to restrain the deficit's growth.
Greenspan has frequently said he would prefer the deficit be shrunk as much as possible through spending cuts -- including reductions in Social Security and Medicare benefits -- before taxes are increased. He said yesterday that he believes raising taxes restrains economic growth and that there is "no way you can raise tax rates enough" to cover future spending commitments.
But he also implied that reaching a bipartisan agreement to reduce the deficit will require some compromises, saying, "We can raise taxes, and I don't deny we probably at the end of the day will do them [tax increases] in order to get an ultimate resolution of this."
Republican congressional leaders have ruled out tax increases to shrink the deficit anytime soon. On the contrary, they are pushing to extend President Bush's expiring tax cut provisions and to pass new tax breaks for energy companies.
But Senate Budget Committee Chairman Judd Gregg (R-N.H.) said after the hearing that he agreed with Greenspan that "both sides of the ledger will have to be looked at" to address the long-term budget challenges. "We're going to have to reduce the benefits, and we're going to have to look at revenues."
Gregg added, "I'm not sure there will be an ultimate agreement."
Greenspan has endorsed extending the recent tax cuts. But he has always done so while urging Congress to restore budget controls requiring lost tax revenue to be offset by similarly sized spending reductions, so there is no net growth in the deficit.
The White House and congressional Republicans support applying the rules to spending increases and not tax cuts, because they would make it nearly impossible politically to extend the tax cuts.