More on Greenspan's testimony before Congress last week. Text via FDCH Washington Transcript Service. Today's focus: "PAYGO" and discretionary caps.

"The first thing I would do is something I regret we haven't done in the last year or two -- is restore PAGE and discretionary caps, because unless you get a budget process system in place, which enables you to handle decision-making so that priorities can be constructed in the manner which will ultimately get you to where you want to go, I don't know how you do it."

We ought to be looking at getting as much as we can in the longer run in the way of expenditure restraint before we look at the issue of filling the gap on the tax side in order to get a viable fiscal policy."

It has been widely reported in the media that Greenspan is supportive of Bush policy. If you look at the two above statements they seem to disagree with that assessment on some levels. After having read all that I can regarding Greenspan's testimony, his endorsements come with caveats.

If You want to make the tax cuts permanent, you need to get your financial house in order. Greenspan's statement about "filling the gap on the tax side in order to get a viable fiscal policy," can only mean that we do not have a viable fiscal policy in place. I agree with this. Record deficit spending concurrent with record trade deficits does not sound fiscal policy make.

PAYGO(the way most of us responsible people handle our finances..on a pay as you go basis) is what I consider sound fiscal policy.

This being an election year, Greenspan doesn't want to rock the boat too much.

Greenspan knows that the Bush tax policy is absurd, but he can see it justified if we rein in discretionary spending to give us a balanced budget. He knows it'll take years, maybe decades of a new policy to recover from the hole we've dug for ourselves, but in an election year, his primary function is that of a soothing grandparent. Don't worry too much, it'll be okay.

Alan made his famous 'irrational exuberance' statement in December of 1996 -- towards the middle of Clinton's second term. While not expressly a politician, he certainly expresses himself like a politician.

Bush tax cuts only good if you can balance them with limits on discretionary spending. It really is that simple.