Greenspan reminded lawmakers that government economists at the time predicted budget surpluses "as far as the eye can see." Yet Greenspan had warned then in congressional testimony that the forecasts might be wrong, and he recommended some "trigger" mechanism that would limit the tax cuts if certain budget targets were not met.

Greenspan said he thinks "it's frankly unfair" for critics to blame him now for the fact that Congress chose to "read half (his) testimony and discard the rest."

Sen. Paul Sarbanes, D-Md., said he believed it was "fair to consider how your message would be taken" and that lawmakers saw Greenspan's 2001 remarks as "providing a green light" for tax cuts, which were enacted without triggers.

"I plead guilty to that," Greenspan said. "If indeed that is the way it was interpreted, I missed it. In other words, I did not intend it that way."

The deficit hit a record $412 billion last year and is projected to expand dramatically in coming decades as the huge baby boom generation starts retiring and collecting Social Security and Medicare benefits.

"The federal budget deficit is on an unsustainable path, in which large deficits result in rising interest rates and ever-growing interest payments that augment deficits in future years," Greenspan said yesterday in prepared testimony.

The economy is "expanding at a reasonably good pace," Greenspan said, without commenting on the recent slowdown in spending and hiring or the outlook for inflation and interest rates.

But, he said, the economy's "positive" short-term pros-pects contrast with longer-run concerns that unrestrained growth in the budget deficit will eventually "cause the economy to stagnate or worse."

The Fed chief called for "major deficit-reducing actions" and proposed several procedural steps Congress could implement to restrain the deficit's growth.

Greenspan frequently has said he would prefer the deficit be shrunk as much as possible through spending cuts — including reductions in Social Security and Medicare benefits for future retirees — 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.

Republican congressional leaders have ruled out tax increases to shrink the deficit any time 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.