Former Fed Chair says administration put politics before sound economics
The Associated Press
Updated: 3:35 p.m. CT Sept 15, 2007
WASHINGTON - Former Federal Reserve Chairman Alan Greenspan, in his upcoming book, bashes President Bush for not responsibly handling the nation’s spending and racking up big budget deficits.
A self-described “libertarian Republican,” Greenspan takes his own party to task for forsaking conservative principles that favor small government.
“My biggest frustration remained the president’s unwillingness to wield his veto against out-of-control spending,” Greenspan wrote.
Bush took office in 2001, the last time the government produced a budget surplus. Every year after that, the government under Bush has been in the red. In 2004, the deficit swelled to a record $413 billion.
“The Republicans in Congress lost their way,” Greenspan wrote. “They swapped principle for power. They ended up with neither. They deserved to lose.”
In 2006, voters decided to put Democrats in charge of Congress for the first time in a dozen years.
Greenspan’s memoir, “The Age of Turbulence: Adventures in a New World, is scheduled for release Monday. The Associated Press purchased a copy Saturday at a retailer in the Washington area.
The book is a recollection of his life and his time as Fed chief.
Greenspan, 81, ran the Fed for 18 1/2 years and was the second-longest serving chief. He served under four presidents, starting with his initial nomination by Ronald Reagan.
Began book when Bernanke took over
He says he began to write the book on Feb. 1, 2006, the day his successor — Ben Bernanke — took over.
The ex-Fed chief writes that he laments the loss of fiscal discipline.
“Congress and the president viewed budgetary restraint as inhibiting the legislation they wanted,’ he wrote. “‘Deficits don’t matter,’ to my chagrin, became part of Republicans’ rhetoric.”
Greenspan long has argued that persistent budget deficits pose a danger to the economy over the long run.
At the Fed, he repeatedly urged Congress to put back in place a budget mechanism that requires any new spending increases or tax cuts to be offset by spending reductions or tax increases.
The large projected surpluses that were the basis for Bush’s $1.35 trillion, 10-year tax cut approved in the summer of 2001 “were gone six to nine months” after Bush took office that year, Greenspan wrote.
There were projections the government would run a whopping $5.6 trillion worth of surpluses over the subsequent decade after the cuts. Those surpluses, the basis for Bush’s campaign promises of a tax cut, never materialized.
“In the revised world of growing deficits, the goals were no longer entirely appropriate,” Greenspan noted. Bush, he said, “continued to pursue his presidential campaigns nonetheless. Most troubling to me was the readiness of both Congress and the administration to abandon fiscal discipline.”
Recalling giving boost to Bush plan
Greenspan, in testimony before Congress in 2001, gave a major boost to Bush’s tax-cut plan at the time, irking Democrats. “The tax cut testimony proved to be politically explosive,” Greenspan wrote.
At that time, Greenspan made the argument before Congress that a tax cut could help the economy deal with sagging growth. The economy slipped into a recession in March 2001. The downturn ended in November of that year.
Surpluses quickly turned to deficits after the bursting of the stock market bubble and the 2001 recession cut into government revenues.
“How could the forecasts have been so colossally wrong?” Greenspan wondered.
Government spending increased to pay for the fight against terrorism and receipts declined because of a string of tax cuts.
The Bush White House defended its fiscal policies.
“Clearly those tax cuts proved to be the right medicine for an ailing economy,” White House spokesman Tony Fratto said. The 2001 recession was a mild one.
“Tax cuts contributed a portion to early deficits, but those tax cuts accelerated growth over time leading to increased business activity, increased job growth and increased tax receipts, which today has us at low historic deficit levels and on a path to a surplus,” Fratto said.
As to the spending side, Fratto added: “We’re not going to apologize for increased spending to protect our national security.”
Greenspan said he was surprised by the political grip that Bush exerted over his administration.
“The Bush administration turned out to be very different from the reincarnation of the Ford administration that I had imagined,’ Greenspan wrote. “Now the political operation was far more dominant.” Greenspan was chairman of the Council of Economic Advisers under President Ford.
Not in the 'inner circle'
Power in the Bush White House was concentrated. “I certainly did not qualify as part of the inner circle, nor did I want to be,” Greenspan said.
Greenspan said he did enjoy a good relationship with Bush’s predecessor, Bill Clinton.
“Here was a fellow information hound, and like me, Clinton enjoyed exploring ideas,” Greenspan said.
They also were on the same economic page. During the Clinton administration, budget deficits turned to surpluses.
When Bush’s father was president, Greenspan recalled that he found himself in a public conflict with the White House. Greenspan had suggested inflation risks were still high enough that the Fed would be more inclined to boost interest rates, rather than lower them. The president quickly challenged the notion.
Of Bush’s father, Greenspan wrote: “The economy was his Achilles’ heel, and as a result we ended up with a terrible relationship.” The economy suffered through a recession went into a recession in the summer of 1990 and emerged from it in the spring of 1991.
Many supporters of the elder Bush blamed Greenspan’s tight-money policies for the recession that contributed to Bush’s loss to Clinton.
© 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
URL: http://www.msnbc.msn.com/id/20781873/
And why is this newsworthy?
If there was just partisanship, president Bush would enjoy an approximate 45% approval at a minimum. His liberal spending and border policies are why we conservatives have our dislikes about him.
Must be a slow news day, the day of the article.
And why is this newsworthy?You're going to ask that about every story that is remotely negative about Bush.
Greenspan is a demigod. People listen to him.
Tenet disagreed, but kept his mouth shut, and we get 9/11.
Greenspan disagreed, but kept his mouth shut, and we get huge deficits that dubya will walk away from, like all the he caused and created in his 2 terms.
Tenet, Greenspan, chicken s both.
I guess someone should have asked the author to clarify the out-of-context quote from his memoir before they ran the headline...
Greenspan: Ouster Of Hussein Crucial For Oil Security
doh!
Nah...you just can't read.
Greenspan was for removing Saddam, so the US could "secure" the oil.
Done, now we're ed.
Greenspan is a genius.
a self-described “libertarian Republican"
Ayn Rand used to sodomize him. I guess that changed his viewpoint.
In Ayn Rand's book "Capitalism: The Unknown Ideal" she includes an essay by Alan Greenspan called "Gold and Economic Freedom".
http://www.usagold.com/gildedopinion/greenspan.html
It's not widely known that Greenspan supports a gold standard and opposes central banking. Or he used to, at least, before he sold out to the Federal Reserve. I wonder if he mentions that in his memoirs.
might as well post this here...
Report: Greenspan says euro could replace U.S. dollar as reserve currency of choice
The Associated Press
Published: September 17, 2007
FRANKFURT, Germany: Former U.S. Federal Reserve chairman Alan Greenspan said it is possible that the euro could replace the U.S. dollar as the reserve currency of choice.
According to an advance copy of an interview to be published in Thursday's edition of the German magazine Stern, Greenspan said that the dollar is still slightly ahead in its use as a reserve currency, but added that "it doesn't have all that much of an advantage" anymore.
The euro has been soaring against the U.S. currency in recent weeks, hitting all-time high of US$1.3927 last week as the dollar has fallen on turbulent market conditions stemming from the ongoing U.S. subprime crisis. The Fed meets this week and is expected to lower its benchmark interest rate from the current 5.25 percent.
Greenspan said that at the end of 2006, some 25 percent of all currency reserves held by central banks were held in euros, compared to 66 percent for the U.S. dollar.
In terms of being used as a payment for cross-border transactions, the euro is trailing the dollar only slightly with 39 percent to 43 percent.
Greenspan said the European Central Bank has become "a serious factor in the global economy."
He said the increased usage of the euro as a reserve currency has led, like in the case of the U.S. dollar, to a lowering of interest rates in the euro zone, which has "without any doubt contributed to the current economic growth."
A sad comment on a guy who helped sack our economy, but is still held as a demi-god by the young and misinformed....
PAUL KRUGMAN: Sad Alan’s Lament
When President Bush first took office, it seemed unlikely that he would succeed in getting his proposed tax cuts enacted. The questionable nature of his installation in the White House seemed to leave him in a weak political position, while the Senate was evenly balanced between the parties. It was hard to see how a huge, controversial tax cut, which delivered most of its benefits to a wealthy elite, could get through Congress.
Then Alan Greenspan, the chairman of the Federal Reserve, testified before the Senate Budget Committee.
Until then Mr. Greenspan had presented himself as the voice of fiscal responsibility, warning the Clinton administration not to endanger its hard-won budget surpluses. But now Republicans held the White House, and the Greenspan who appeared before the Budget Committee was a very different man.
Suddenly, his greatest concern — the “emerging key fiscal policy need,” he told Congress — was to avert the threat that the federal government might actually pay off all its debt. To avoid this awful outcome, he advocated tax cuts. And the floodgates were opened.
As it turns out, Mr. Greenspan’s fears that the federal government would quickly pay off its debt were, shall we say, exaggerated. And Mr. Greenspan has just published a book in which he castigates the Bush administration for its fiscal irresponsibility.
Well, I’m sorry, but that criticism comes six years late and a trillion dollars short.
Mr. Greenspan now says that he didn’t mean to give the Bush tax cuts a green light, and that he was surprised at the political reaction to his remarks. There were, indeed, rumors at the time — which Mr. Greenspan now says were true — that the Fed chairman was upset about the response to his initial statement.
But the fact is that if Mr. Greenspan wasn’t intending to lend crucial support to the Bush tax cuts, he had ample opportunity to set the record straight when it could have made a difference.
His first big chance to clarify himself came a few weeks after that initial testimony, when he appeared before the Senate Committee on Banking, Housing and Urban Affairs.
Here’s what I wrote following that appearance: “Mr. Greenspan’s performance yesterday, in his first official testimony since he let the genie out of the bottle, was a profile in cowardice. Again and again he was offered the opportunity to say something that would help rein in runaway tax-cutting; each time he evaded the question, often replying by reading from his own previous testimony. He declared once again that he was speaking only for himself, thus granting himself leeway to pronounce on subjects far afield of his role as Federal Reserve chairman. But when pressed on the crucial question of whether the huge tax cuts that now seem inevitable are too large, he said it was inappropriate for him to comment on particular proposals.
“In short, Mr. Greenspan defined the rules of the game in a way that allows him to intervene as he likes in the political debate, but to retreat behind the veil of his office whenever anyone tries to hold him accountable for the results of those interventions.”
I received an irate phone call from Mr. Greenspan after that article, in which he demanded to know what he had said that was wrong. In his book, he claims that Robert Rubin, the former Treasury secretary, was stumped by that question. That’s hard to believe, because I certainly wasn’t: Mr. Greenspan’s argument for tax cuts was contorted and in places self-contradictory, not to mention based on budget projections that everyone knew, even then, were wildly overoptimistic.
If anyone had doubts about Mr. Greenspan’s determination not to inconvenience the Bush administration, those doubts were resolved two years later, when the administration proposed another round of tax cuts, even though the budget was now deep in deficit. And guess what? The former high priest of fiscal responsibility did not object.
And in 2004 he expressed support for making the Bush tax cuts permanent — remember, these are the tax cuts he now says he didn’t endorse — and argued that the budget should be balanced with cuts in en lement spending, including Social Security benefits, instead. Of course, back in 2001 he specifically assured Congress that cutting taxes would not threaten Social Security.
In retrospect, Mr. Greenspan’s moral collapse in 2001 was a portent. It foreshadowed the way many people in the foreign policy community would put their critical faculties on hold and support the invasion of Iraq, despite ample evidence that it was a really bad idea.
And like enthusiastic war supporters who have started describing themselves as war critics now that the Iraq venture has gone wrong, Mr. Greenspan has started portraying himself as a critic of administration fiscal irresponsibility now that President Bush has become deeply unpopular and Democrats control Congress.
" European Central Bank has become "a serious factor in the global economy." "
The Europeans are thrilled that oil is denominated in US$, with the US$ being in the toilet vs the Euro.
Imagine if oil were denominated in Euros and the Euro price rise in oil, as seen at US borders, was compounded historic weakness of the US$?
The is not the revenues but the expenses.
How much money has the US thrown down the drain in the Iraq war?
There, my world power, imperialistic friends, lies the problem.
Last edited by smeagol; 09-18-2007 at 08:36 AM.
Well, Greenspan spoke well of Rush Limbaugh. Damn Greespan!
Hush is great entertainer... nothing more. he plays to his backslapping audience.
Well, Rush is a great entertainer. But he is more than that. Besides being an arrogant jerk at times, he brings a point of view that is more credible than the liberal ANNs (Alphabet News Networks.) The left hates him and vilifies him because he does show them for the evil traitors to the cons ution that they are.
This is the first chance I have in ages to listen to him. I actually have free time this morning, and he comes on in less than an hour.
actually, the right needs to apologize for the ramblings of that drug addicted racist.
what are you talking about? he uses opinion as if it is fact. that is more credible than the news? I'm sorry but if you take hush out of the equation most educated people would disregard anyone like him because of his bas ization of truth. The left hates him because he and talk radio have managed to spilt this country in half. We can all agree that there are fringe elements on both sides of the political aisle but he portrays many on the left as fringe. That is preposterous and intellectually lazy.. I don't remember who wrotee this about him but he/she nailed it.. he shadow boxes with soundbites..
Since he brings a 'credible' opinion why was his stupid a$$ thrown off ESPN? Because he accused people who actually had a platform to respond to him..ever wonder why the guy never has guests on that he can debate?
^^Why was he thrown off ESPN? IMO it was because he told
it like it was. A black QB, McNabb, was being immortalized because.
well, he was black. And no one wanted to see him fail. It
wasn't fair to him or anyone. And as everyone knows the
left, liberals, progressives, cannot stand to have their views
attacked. If you attack them, hang on cause you are fair
game.
As far Rush putting out his opinion, he always lets you know it
is his opinion and on what side of the political spectrum he is
representing. He doesn't do as so many of you do, and say
you are fair and unbiaised. He also gives you the lefts side of
the picture. Listen to him, you may find he has a valid argument.
what does a drug addicted racist have to do with greenspan?
He takes undeniable facts and interjects opinion, and is right most the time. He is not wrong very often.
I'm not sure what you mean. If he is what you claim, why don't educated people disregard him?
No, he does a very good job of exposing how the left does the dividing of the country.
Yes, radicals at both ends. He doesn't improperly call all liberals radical, or fringe in my experience of listening to him. What is preposterous and intellectually lazy is for someone to say such things without listening to him much. I cannot know this for sure, but by your statements, I will assume you have only heard sound bites of Rush's program rather than everything in full context.
Yes, he does use sound bites too. All media sources do. I have yet to find him use a sound bite out of context, but I find it all the time from the mainstream media and liberal talk show hosts.
Yes... I listen to left programming too. I get Air America on a local station here in Portland.
Now you're just throwing out that has been asked and answered so many times you had to have seen it. Had he said the same thing about a white QB, nothing would have been said. However, since he is conservative, idiots automatically assume it was a racial remark. It's those making such assumptions who are the prejudice ones
As for debating others. He has at times. He does a perfectly fine job of combating the callers. He just has a format that works fine for him and makes him eight figures annually.
it was the drug addicted racist that made the racial remark.
for 99%, you're not very good at addition.
anyway, aside from wc's ignorance, think about how long greenspan has known bush and cheney. all he really did was verbalize an accurate description of the current administration and how they compare to past administrations. he said he's been around some very smart people, and bush ain't one of them.
He's being interviewed on Fresh Air today. Still a little cryptic but saying some interesting things.
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