posted on September 15, 2007 08:38:26 PM new
Greenspan Faults Bush Over Spending
Updated 10:48 PM ET September 15, 2007
By JEANNINE AVERSA and ANN SANNER
WASHINGTON (AP) - Former Federal Reserve Chairman Alan Greenspan, in his new 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.
And he weighed in briefly but pointedly on the Iraq war: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."
Bush took office in 2001, the last time the government produced a budget surplus. Every year after that, the government 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 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.
He says he began to write the book on Feb. 1, 2006, the day his successor _ Ben Bernanke _ took over. A caption under a photo of Bernanke's swearing-in has Greenspan saying he was "very comfortable leaving the post in the hands of such an experienced successor."
The ex-Fed chief writes that he regrets the loss of fiscal discipline under Bush.
"`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.
Large projected surpluses were the basis for Bush's $1.35 trillion, 10-year tax cut approved in the summer of 2001.
Budget experts projected 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, stuck with his campaign promises anyway. "Most troubling to me was the readiness of both Congress and the administration to abandon fiscal discipline."
Greenspan, in testimony before Congress in 2001, gave a major boost to Bush's tax-cut plan, irking Democrats.
He argued then 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.
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 in light of the Greenspan book.
"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," Fratto said. He 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 different from "the reincarnation" of the Ford administration that Greenspan said he had imagined. "Now the political operation was far more dominant." Greenspan was chairman of the Council of Economic Advisers under President Ford.
Greenspan enjoyed a good relationship with Bush's predecessor, Bill Clinton, "a fellow information hound."
They also were on the same economic page. During the Clinton administration, budget deficits turned to surpluses.
Greenspan recalled a conflict with the White House when Bush's father was president. The elder Bush wanted lower interest rates and challenged Greenspan's inclination to raise them because of inflation risks.
For Bush's father, the economy was his "Achilles' heel, and as a result we ended up with a terrible relationship." The economy 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.
Greenspan says in the book he does not lament the loss of America's manufacturing base.
"The shift of manufacturing jobs in steel, autos and textiles, for example, to their more modern equivalents in computers, telecommunications and information technology is a plus, not a minus, to the American standard of living," Greenspan wrote.
Greenspan's memoir includes his early years growing up in a New York City neighborhood of low-rise brick apartment buildings filled with families of Jewish immigrants, his stint as a jazz musician and his decades as a Washington policymaker.
Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
posted on September 16, 2007 07:15:40 AM new
To me, I find it ironic that the dems/liberals THINK they're using this against the republican party, when they've ALWAYS been known as the 'tax and spend' party. And NOW they're criticizing the republicans for what THEY'VE ALWAYS done. Again, their UGLY double standards. tsk tsk tsk
In addition to that....all one has to do is listen NOW to how much the dems want to spend on all sorts of 'promised' goodies that will RAISE our taxes even further. Why? Because they have MORE so called great plans to spend HUGE amounts of money. Health care being only one of them. Anyone who believes $120 Billion a year for health care isn't a giant spending proposal.....has lost all sense of thinking ability.
=============================
Greenspan Book
Criticizes Bush
And Republicans
'They Deserved to Lose';
Former Fed Chief Defends
Pre-Bubble Rate Cuts
By GREG IP and EMILY STEEL
September 15, 2007; Page A1
In a withering critique of his fellow Republicans, former Federal Reserve Chairman Alan Greenspan says in his memoir that the party to which he has belonged all his life deserved to lose power last year for forsaking its small-government principles.
In "The Age of Turbulence: Adventures in a New World," published by Penguin Press, Mr. Greenspan criticizes both congressional Republicans and President George W. Bush for abandoning fiscal discipline.
The book is scheduled for public release Monday. The Wall Street Journal bought a copy at a bookstore in the New York area.
Mr. Greenspan, who calls himself a "lifelong libertarian Republican," writes that he advised the White House to veto some bills to curb "out-of-control" spending while the Republicans controlled Congress. He says President Bush's failure to do so "was a major mistake." Republicans in Congress, he writes, "swapped principle for power. They ended up with neither. They deserved to lose."
Many economists say the Fed, by cutting short-term interest rates to 1% in mid-2003 and keeping them there for a year, helped foster a housing bubble that is now bursting. In his book, which was largely written before much of the recent turmoil in credit markets, Mr. Greenspan defends the policy. "We wanted to shut down the possibility of corrosive deflation," he writes. "We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address....It was a decision done right."
He attributes the housing boom to the end of communism, which he says unleashed hundreds of millions of workers on global markets, putting downward pressure on wages and prices, and thus on long-term interest rates.
Mr. Greenspan retired in early 2006 after 18 years as chairman of the Federal Reserve. He had served under six presidents as either Fed chairman or adviser. He now runs a private consulting company; his only formal public role is adviser to British Prime Minister Gordon Brown.
Penguin paid an advance of more than $8 million last year for Mr. Greenspan's book, according to people familiar with the matter. Promotion for the book includes appearances by Mr. Greenspan on CBS's "60 Minutes," NBC's "Today" and CNBC, interviews with foreign and U.S. media, book signings and speaking engagements. The book's official release comes a day before the most-watched Fed meeting of the year. On Tuesday, Mr. Greenspan's successor, Ben Bernanke, must decide whether to cut interest rates to cushion the economy from the reversal of the housing boom that began under Mr. Greenspan's watch.
His book is half memoir and half treatise on the state of the world and its future. While much of the ground has been covered either in his own previous public remarks or in other books, Mr. Greenspan sheds new light on many policy decisions, offers often-trenchant observations of the presidents he has known and makes some surprising economic forecasts, unmuffled by the often opaque and complex phraseology he used as Fed chairman. Critics, however, may seize on his continued defense of decisions they say led to first a stock bubble and then a housing bubble, and on some assertions that differ from the historical record.
Mr. Greenspan writes that when President Bush chose Dick Cheney as vice president and Paul O'Neill as treasury secretary -- both colleagues from the Gerald Ford administration, during which Mr. Greenspan was chairman of the Council of Economic Advisers -- he "indulged in a bit of fantasy" that this would be the government that would have resulted if Mr. Ford hadn't lost to Jimmy Carter in 1976. But Mr. Greenspan discovered that in the Bush White House, the "political operation was far more dominant" than in Mr. Ford's. "Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he writes.
From serving under so many presidents, Mr. Greenspan concludes that there's something abnormal about anyone willing to do what it takes to get the job. Mr. Ford, he writes, "was as close to normal as you get in a president, but he was never elected." The Watergate tapes, he says, show Richard Nixon as "an extremely smart man who is sadly paranoid, misanthropic and cynical." He recalls telling someone who had accused Nixon of anti-Semitism that he "wasn't exclusively anti-Semitic. He was anti-Semitic, anti-Italian, anti-Greek, anti-Slovak. I don't know anybody he was pro."
Ronald Reagan's ability to instantly tap one-liners and anecdotes in support of a particular policy represented an "odd form of intelligence." He describes Bill Clinton as "a fellow information hound" with "a consistent, disciplined focus on long-term economic growth" whose relationship with Monica Lewinsky "made me feel disappointed and sad."
Mr. Greenspan makes no mention of his successor as Fed chairman, Mr. Bernanke, other than in a caption accompanying a picture: "I was very comfortable leaving the post in the hands of such an experienced successor," it reads.
He devotes chapters to each of the major economic challenges facing the U.S. and the world. On energy, he recommends more use of nuclear power, and he predicts efforts to reduce global warming with carbon caps or taxes will fail. Rising income inequality could undo "the cultural ties that bind our society" and even lead to "large-scale violence." The remedy, he says, is not higher taxes on the rich but improved education, which can be helped by paying math teachers more.
Mr. Greenspan returns repeatedly to the far-reaching importance of communism's collapse. He says it discredited central planning throughout the world and inspired China and later India to throw off socialist policies. He recalls meeting a former manager of a produce distribution center in China who says he once had to labor to allocate produce according to government edict; now the allocations are made by auction. "Now I don't have to get up at four a.m.," he quotes the manager as saying. "I can sleep in and let the market do my job for me." Mr. Greenspan recalls his amazement when an adviser to Russian President Vladimir Putin asks him to discuss Ayn Rand, the libertarian philosopher with whom Mr. Greenspan had been friends.
In coming years, as the globalization process winds down, he predicts inflation will become harder to contain. Recent increases in the price of imports from China and a rise in long-term interest rates suggest "the turn may be upon us sooner rather than later."
Left alone, he said, the Fed's policy-making body, the Federal Open Market Committee, can keep inflation between 1% and 2%, but that could require forcing interest rates to double-digits, a level "not seen since the days of Paul Volcker," his predecessor as Fed chairman. "I fear that my successors on the FOMC, as they strive to maintain price stability in the coming quarter century, will run into populist resistance from Congress, if not from the White House," he writes.
If the Fed succumbs to that pressure, inflation could rise from a little over 2% at present to an average of 4% to 5% by the year 2030, he writes. Ten-year Treasury yields, now below 5%, will rise to "at least 8%" with the potential to go "significantly higher for brief periods." This, he says, will lead to stagnant returns on stocks and bonds and much smaller gains in housing prices.
Mr. Greenspan won plaudits for achieving low inflation and unemployment with just two mild recessions during his tenure at the Fed. But more recently his record has taken some knocks. Some critics fault him for not doing more to restrain the stock bubble of the 1990s, and for responding to its eventual bursting with such low interest rates that housing prices subsequently soared.
Mr. Greenspan writes that in early 1997, he told his colleagues the Fed should raise interest rates as a "preemptive" move against a stock-market bubble. But transcripts of Fed meetings from that period do not support his book's version of events: They show Mr. Greenspan argued for a rate increase principally because of inflation.
end/
[ edited by Linda_K on Sep 16, 2007 07:18 AM ]
posted on September 16, 2007 07:25:47 AM new
Ooze,"""To me, I find it ironic that the dems/liberals THINK they're using this against the republican party, when they've ALWAYS been known as the 'tax and spend' party. And NOW they're criticizing the republicans for what THEY'VE ALWAYS done. Again, their UGLY double standards. tsk tsk tsk
In addition to that....all one has to do is listen NOW to how much the dems want to spend on all sorts of 'promised' goodies that will RAISE our taxes even further. Why? Because they have MORE so called great plans to spend HUGE amounts of money. Health care being only one of them. Anyone who believes $120 Billion a year for health care isn't a giant spending proposal.....has lost all sense of thinking ability. """
LOL! So, linduh, defends the repugs ONCE AGAIN by saying the "dems/liberals" did it, too!
linduh thinks it's OK because the "dems/liberals" have done it....so why does she object to them doing it ???
Gee, ya think DOUBLE STANDARDS apply?
Anyone who believes a trillion for "Iraq care" isn't a giant spending FACT.....has lost all sense of thinking ability. """
Again, their UGLY double standards. tsk tsk tsk
