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Wall Street JournalIn 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.
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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.
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http://online.wsj.com/article/SB118978549183327730.html?mod=hpp_us_whats_news
Former Federal Reserve Chairman Alan Greenspan criticized President George W. Bush for pursuing an economic agenda driven by politics rather than sound policy, with little concern for future consequences.
Soon after Bush took office, Greenspan wrote in a new book, it became evident that the Treasury secretary and White House economists would play secondary roles in decisions on taxes and other issues. In addition, officials with whom he had worked in the administration of President Gerald Ford changed after Bush brought them back to Washington, he said he found.
``The Bush administration turned out to be very different from the reincarnation of the Ford administration that I had imagined. Now, the political operation was far more dominant,'' Greenspan, 81, wrote in ``The Age of Turbulence: Adventures in a New World.'' The book, an advance copy of which was obtained by Bloomberg News, is scheduled for publication on Sept. 17. The Wall Street Journal published an account on its Web site today after buying a copy at a New York-area bookstore.
Greenspan saved his harshest analysis for the current president. Soon after Bush took office in 2001, the president set about implementing a campaign promise to cut taxes, a policy Greenspan said he believed at the time wasn't well conceived.
``Little value was placed on rigorous economic policy debate or the weighing of long-term consequences,'' he wrote.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFm7L8vuX_ts&refer=worldwide
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