Federal Reserve Chairman Alan Greenspan says increased spending on domestically produced goods to supply U.S. forces in the Persian Gulf will boost the nation's sagging gross national product.

Greenspan, in a briefing for members of the House Budget Committee, also said Tuesday that rising oil prices stemming from Iraq's Aug. 2 invasion of Kuwait helped push the U.S. economy into recession. But he added there is no evidence "at the moment" to show the recession will be deep and prolonged."One can't rewind history," Greenspan said when asked if the economy would have entered recession with or without the impact of higher oil prices.

"My recollection was that prior to Aug. 2, I thought it was a close call, maybe with the expectation we'd work our way out without a recession."

Recession is generally described as two consecutive quarters of negative economic growth. Greenspan said the chances of skirting recession were better than 50-50 without war in the Middle East.

The Fed chairman said he expects the upcoming forecasts of the Congressional Budget Office and the Bush administration to show declines in the GNP for the fourth and first quarters.

Such a revelation would require the Senate, and give the House an option, to consider a joint resolution to suspend enforcing provisions of the hard-fought budget agreement reached last fall. Approving the resolution

"would be a mistake," Greenspan said, without evidence that the recession will be deep and prolonged.

Although the financial costs of war will be high, Greenspan said the U.S. GNP will be boosted by increased defense spending for Operation Desert Storm, which is not subject to budgetary constraints. The increased defense spending, however, is likely to add to the nation's growing budget deficit.

"Other nations are expected to share in the cost of the war, and their contributions will help to cushion the effect on the budget deficit," Greenspan said. "But regardless of who is paying for it, Desert Storm spending on newly produced domestic items will boost U.S. GNP."

The costs of war could be greater, Greenspan said, should Iraqi President Saddam Hussein gain control of a majority of the world's known oil reserves.

"There's no question the implications of having the current Iraqi regime control 60 percent or more of the proven oil reserves would create some very major long-term disruptions in the world's economic environment," Greenspan said.

"Under those conditions, Saddam Hussein would be able to dictate the amount of oil that goes around the world," he said. "That would have an extraordinary effect on the world in general."