The recently published memoirs of former Federal Reserve chairman Alan Greenspan are getting a good deal of attention from the punditocracy. A review on Bloomberg.com calls it a "Democratic Gift, Republican Grenade", and quotes Republicans who claim to share Greenspan’s concerns about the GOP, and Democrats who are thrilled to receive such heavy duty ammunition heading into the 2008 campaign for the White House.
Alan Greenspan, a conservative central banker, has tossed a political grenade into the 2008 elections and it exploded right under his Republican Party. In his memoir, “The Age of Turbulence: Adventures in a New World,” the former Federal Reserve chairman skewered President George W. Bush and congressional Republicans for what he said was reckless spending and a politically driven economic agenda and said they deserved to lose control of Congress in 2006. By contrast, he praised former President Bill Clinton, a Democrat, and his economic record.
I won’t be offering a review here since I’ve yet to read it, but among all of the laudatory accolades, Robert Novak’s harsh criticisms stand out to us. Yes, Novak may come across as increasingly "cranky" in his old age, as derided by hacks on the left recently, but as conservative political journalists go, he seems forthright and independent enough to listen to. He has also taken on a thankless but important task, reminding us that Alan Greenspan, like other personality cult icons, is simply a human being like the rest of us. In a short review, he gets rather personal, offering anecdotes that call into question Greenspan’s candor and carefully crafted image of reluctant public servant, but he offers some substance too when he questions Greenspan’s views on taxes, growth, and budget deficits:
In "The Age of Turbulence," Greenspan buys into the discredited depiction of Ronald Reagan (who first named Greenspan to the Fed) as an amiable dunce and does not conceal contempt for both Bushes (each of whom nominated him). Even more surprising is his adoration of Clinton. While scathing in attacking increased spending by George W. Bush, he ignores massive non-defense spending hikes under Clinton and embraces the Democrat’s tax increase "as our best chance in 40 years to get stable long-term growth." Greenspan’s book ignores Reagan’s tax-cutting supply-side movement as if it never happened. Seeing no inherent benefits from a lower tax burden, he accepts the Democratic deficit-reduction formula that a dollar of higher taxes is equivalent to a dollar of reduced spending.
While Novak’s economic criticisms will be dismissed out of hand by most, given his relative lack of bona fides next to Greenspan’s PhD, it’s important to note that this passage captures aspects of longstanding debates within the economics profession. And looking forward to 2008, if Democrats focus on balancing the federal budget through tax hikes, while rest of the world expands incentives to private production and the Fed keeps policy easy to support the domestic economy, then the stagflationary specter for the U.S. will loom that much larger.