Just Another Beltway Hack

Paul Krugman of the New York Times weighs in here on how former Federal Reserve bank chief Alan Greenspan greased the skids for Bushco’s record budget deficits by encouraging the utterly ruinous tax cuts that have led to the worst fiscal mismanagement in our government’s history. Krugman’s column is a response to Greenspan’s new book in which he “launches a harshly critical attack” on Dubya and his alleged “economic competence.”

(Atrios, by the way, refutes Brad DeLong here somewhat, who actually rallies to Greenspan’s defense a bit. I tend to take the side, though, that Greenspan should have been a lot more direct in discouraging Bushco’s fiscal recklessness. I’m starting to get just a little tired of people now coming out of the woodwork, or so it seems, criticizing this regime when they could have done so a lot earlier and had more impact; see Chuck Hagel and others...Hagel's otherwise odious voting record in support of Bushco is noted here.)

I did a little checking into Greenspan’s tenure with the Federal Reserve under Bushco and found out a few things (sorry, I know a lot of these New York Times links are “behind the wall” now).

This was written back in March 2003, when Greenspan was apparently still debating whether or not he would return as Fed chairman, including this excerpt…

Mr. Greenspan, now 77 and one year away from the end of his fourth four-year term as Fed chairman, has a complex relationship with the White House. Alert and energetic as ever, he recently annoyed many administration officials by casting doubt on the wisdom of the president's tax-cutting plans.

But Mr. Greenspan is in many respects President Bush's quiet partner in the war on Iraq.

If the war goes worse than expected, or if the economy does not bounce back when combat ends, Fed officials have strongly suggested they will pump money into the economy by reducing interest rates even more than they have already.

Perhaps equally important to the Bush administration, Mr. Greenspan has betrayed little anxiety about the costs of war or the risks of disruption to world oil supplies. Given the extent to which political leaders and financial markets dissect every word Mr. Greenspan utters, his apparent comfort is a crucial source of support for Mr. Bush.

The Fed chairman meets regularly with Vice President Dick Cheney, a longtime friend who is President Bush's most trusted adviser, as well as with John W. Snow, the Treasury secretary. Mr. Greenspan has been at the White House at least three times in the past 10 days, and he met with Mr. Bush on Monday to review the economic outlook.

This was written when he decided to return as chairman a month later…

Of course, what would help the administration most would be a strong, growing economy. Appearing today in Canton, Ohio, Mr. Bush said the way to energize the economy was a $550 billion tax cut over 10 years, not the ''little-bitty tax relief package'' of $350 billion over that period that Senate leaders have said is all he can get now that senators have discovered the budget deficit.

Mr. Bush may be right. But hardly any well-known economists disagree with the Congressional Budget Office's judgment that even the $550 billion would make little real difference.

...

(Greenspan) did infuriate many Republicans in February when he said he was not convinced that the economy needed tax cuts for stimulus, though the next day he came back toward the reservation and emphasized the importance of spending cuts. But except for that occasion, he has not made waves for the administration.

And Mr. “Don’t Make Waves” was back in July of that year to spread more good karma…

The Federal Reserve is prepared to hold interest rates low ''for as long as needed'' to stimulate further growth, the chairman, Alan Greenspan, said today, even as he presented an unexpectedly upbeat economic forecast to a House committee.

...

Most of Mr. Greenspan's testimony to the House Financial Services Committee today was a bright collage of indicators showing a recovery ahead, and he even praised the Bush administration's tax cut for increasing household income and leading to higher consumer spending. But he went out of his way to assure lawmakers that the economy had not yet reached the point at which the Fed would contemplate bringing interest rates up.

Greenie seemed to be a little more inscrutable here in March 2004, though (a little)…

In the 1990's, Mr. Greenspan implored President Bill Clinton to lower the budget deficit and tacitly condoned tax increases in doing so. Today, with the deficit heading toward a record of $500 billion, he warns more emphatically about the risks of raising taxes than about shortfalls over the next few years.

And here in September 2004, Greenie tells us that “the economic expansion has gained some traction” (more Beltway fairy tales).

And in this article, by the way (in a financial vein overall), we receive this little tidbit about the alleged fiscal acumen of Jim Nussle, who the Senate just confirmed as Bushco’s next director of the Office of Management and Budget…

''You cannot manufacture a consensus for statutory controls when the consensus for budget discipline is not strong enough,'' said Representative (Nussle), Republican of Iowa and chairman of the House Budget Committee.

''I do not believe, unfortunately, there is a broad enough consensus necessary to enact budget controls into law.''

Well, then, you should just work harder at trying to establish that consensus, shouldn't you, Jim? We all have to balance budgets as best we can - why shouldn't Congress? Or would belaboring that point make your fellow Repugs look bad?

And getting back to Greenie here, let’s not forget that he supported Dubya’s privatization scheme for Social Security, and there is also a lot more he could have done about the dot.com and housing “bubbles,” each of which eventually burst (noted here).

Greenspan was a typical Washington bureaucrat more concerned with currying the favor of the government in power than in performing sound fiscal stewardship. Though his actions were contemptible then as now, he has a boatload of company when it comes to people more concerned with maintaining their illusory fame and sense of privilege than standing up on behalf of those they represent, be they elected or appointed.

That is how he will be remembered. And he can write as many books as he wants blaming others, but that is an indisputable fact.

Update: Figures...

Update 9/24: Tom Tomorrow via Prof. Marcus nails it.

Update 10/2: Why am I not surprised by this?