Greenspan bashes Bush economic policies

[Quinn]

Former Fed Chair says administration put politics before sound economics

WASHINGTON - 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.

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.

Lamented build-up of deficits
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.

The ex-Fed chief writes that he laments the loss of fiscal discipline.

“‘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.

Surplesses never materialized
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.

At that time, Greenspan argued 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.

White House defends 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 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.”

Of the conflict in the Middle East, Greenspan said: “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.”

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.

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 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. But Greenspan was “disappointed and sad” when news surfaced that Clinton had an affair with Monica Lewinsky, a White House intern.

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.

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.

http://www.msnbc.msn.com/id/20781873/

[trish]

don't ya know bush was (and is) just giving back the surplus to those who never paid their fair share in the first place. we didn't need that money for social security. we don't even need it to pay for the war. hell, our children and grandchildren can pay for that...but not the rich ones. the rich ones will continue to enjoy a tax free life so their money can trickle down to the rest of our grandchildren in the form of tips for services rendered.

[hippifried]

OMG, Trish!
Smart & cynical too.
I think I'm falling in love.


I'm no fan of Greenspan. I remember all too clearly the economic fiasco of '73, known euphemistically as "wage & price controls". That was Greenspan's baby. As Nixon's chief economic advisor, he designed it & talked the President into implementing it. Of course the price control part was ignored from the outset, but wage earners couldn't get a raise by executive fiat. Prenegotiated union contracts were negated. Working people couldn't keep up let alone catch up. The Greenspan plan turned all economic theory on its ear when inflation & unemployment both hit double digits at the same time & sent the economy into a tailspin. A new term was coined. "Stagflation". Greenspan didn't coin the term, but he was its creator. I still can't believe that he wasn't tarred & feathered at the time. In fairness, the public attention was being redirected by the Watergate scandal. What a pompous arrogant asshole this guy is. He's got a lot of damn gall talking about restraint & a free economy.

On the other hand: I'm no big fan of the lunatics that are running the assylum we call the Whitehouse right now. Is the Iraq war about oil? Well... The only thing we know for sure is that it isn't about anything we were told it's about. Personally, I think it's just a continuation of the perpetual war we've been tangled up in since 1941. Between the implosion of the Soviet Union & 9/11/01, we were just stumbling around looking for a new full time enemy. Looks like we found one. The enemy is our own peace of mind. Complacency won't buy any new weapon systems. Peace doesn't boost the ratings on the cable news channels. Paris, Brittney, & Lindsey can't carry the whole load. We need to feel terrorized, damnit! But not quite enough to interfere with our shopping habits.

How's that for cynical?

[qeuqheeg222]

damn good cynicism...britney and paris and them help the consumer spending habits too...

[Idgaf]

Yes ,The news media reported how Greenspan "bashed" The Bush Administration economic policies AND
Totally downplayed the portion where he admonished the Democrats for playing along as long as they got their "pork" to satisfy their voters.

I agree with the comment by hippifried but I would still take Greenspan over Bernanke.
Bernanke is in a poor place to be "cutting his teeth".
The Executive and the Chairman of the Fed have different lengths of their terms in office to help avoid problems such as undo force or collusion.
The Chairman of the Fed has a 6 year term.
The President a 4 year term.

[thx1138]

Sir Alan Greenspan = America hater and overseer of the sub prime crisis.