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William Greider | The Lies of Alan Greenspan    [

    Sad Alan's Lament
    By Paul Krugman
    The New York Times

    Monday 17 September 2007

    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 entitlement 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.

 

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    Go to Original

    The Lies of Alan Greenspan
    By William Greider
    The Nation

    Monday 17 September 2007

    Alan Greenspan has come back from the tomb of history to correct the record. He did not make any mistakes in his eighteen-year tenure as Federal Reserve chairman. He did not endorse the regressive Bush tax cuts of 2001 that pumped up the federal deficits and aggravated inequalities. He did not cause the housing bubble that is now in collapse. He did not ignore the stock market bubble that subsequently melted away and cost investors $6 trillion. He did not say the Iraq War is "largely about oil."

    Check the record. These are all lies.

    Greenspan's testimony endorsing the Bush tax cuts was extremely influential but now he wants to run away from it.

    In the instance of Iraq, Greenspan is actually correcting his own memoir, The Age of Turbulence, which just came out. This weekend, newspapers reported provocative snippets from the book, including this: "I am saddened that it is politically inconvenient to acknowledge what every everyone knows: the Iraq war is largely about oil."

    Wow, talk about your "inconvenient truth." Greenspan was blithely acknowledging what official Washington has always denied and the news media faithfully ignored. "Blood for oil." No, no, no, that's not what he meant, Greenspan corrected in a follow-up interview. [Bob Woodward in Monday's Washington Post] He was only saying that "taking out Saddam was essential" for "oil security" and the global economy.

    Are you confused? Welcome to the world of slippery truth Greenspan has always lived in. He was the Maestro, as Bob Woodward's loving portrait dubbed him. Wall Street loved the Chairman best because the traders and bankers knew he was always on their side and would come to their rescue. The major news media treated him like an Old Testament prophet. Whatever the chairman said was carved on stone tablets, even when it didn't make any sense, as it often didn't.

    Some of us who followed his tracks more closely, were not so kind. Harry Reid, now the Democratic Senate leader, said Greenspan was "one of the biggest political hacks in Washington." Amen. I called him "the one-eyed chairman" who could always spot reasons to stomp on the real economy of work and production, but was utterly blind to the destructive chaos in the financial system. No matter. The adoration of him was nearly universal.

    Until now. The economic consequences of his rule are accumulating and even the dullest financial reporters are stumbling on crumbs of truth about Greenspan's legendary reign. It sowed profound and dangerous imbalances in the US economy. That's what happens when government power tips the balance in favor of capital over labor, favoring super-rich over middle class and poor, then holds it there for nearly a generation.

    Things get out of whack and now the country is paying big time. A pity reporters and politicians didn't have the nerve to ask these questions when Greenspan was in power.

    He retired only a year ago, but is already trying to revise the history. To explain away blunders that are now a financial crisis facing his successor. To rearrange the facts in exculpatory ways. To deny his right-wing ideological bias and his raw partisanship in behalf of the Bush Republicans.

    The man is shrewd. He can see the conservative era he celebrated and helped to impose upon the American economy is in utter ruin. He is trying to get some distance from it before the blood splashes all over his reputation. Of course, he also came back to cash in-an $8 million advance for a book that is sure to be a huge bestseller. I don't want to be unkind, but Greenspan could have avoided all the embarrassing questions if his book was posthumous.

    I haven't the read it yet. I have a hunch I am not going to like it.