He accuses the Republicans who presided over the party's majority in the House until last year of being too eager to tolerate excessive federal spending in exchange for political opportunity.
WASHINGTON — Alan Greenspan, the Federal Reserve’s chairman for 18 years and the leading Republican economist for the past three decades, levels unusually harsh criticism at President Bush and the Republican Party in his new book, saying Bush abandoned the central conservative principle of fiscal restraint.
While condemning Democrats, too, for rampant federal spending, he offers former President Clinton an exemption. Clinton emerges as the political hero of “The Age of Turbulence: Adventures in a New World,” Greenspan’s memoir, out Monday.
Greenspan, who calls himself a “libertarian Republican” but had an eight-year alliance with Clinton and Democratic Treasury secretaries in the 1990s, praises Clinton’s mind and his tough anti-deficit policies, calling the former president’s 1993 economic plan “an act of political courage.”
But he expresses deep disappointment with Bush. “My biggest frustration remained the president’s unwillingness to wield his veto against out-of-control spending,” Greenspan writes.
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Greenspan accuses the Republicans who presided over the party’s majority in the House until last year of being too eager to tolerate excessive federal spending in exchange for political opportunity. The Republicans, he says, deserved to lose control of the Senate and House in last year’s elections.
“The Republicans in Congress lost their way,” Greenspan writes. “They swapped principle for power. They ended up with neither.”
He singles out Dennis Hastert, the Illinois Republican who was House speaker until January, and Tom DeLay, the Texan who was majority leader until he resigned after being indicted in connection with alleged campaign-finance violations in his home state. DeLay has denied wrongdoing.
“House Speaker Hastert and House Majority Leader Tom DeLay seemed readily inclined to loosen the federal purse strings any time it might help add a few more seats to the Republican majority,” Greenspan writes.
He adds three pages later: “I don’t think the Democrats won. It was the Republicans who lost. The Democrats came to power in the Congress because they were the only party left standing.”
Greenspan, 81, indirectly criticizes his friend and colleague from the Ford administration, Vice President Dick Cheney. Former Bush Treasury Secretary Paul O’Neill has quoted Cheney as once saying, “Reagan proved deficits don’t matter.”
Says Greenspan: ” ‘Deficits don’t matter,’ to my chagrin became part of the Republicans’ rhetoric.”
He argues that “deficits must matter” and that uncontrolled spending and borrowing can produce high inflation “and economic devastation.”
When Bush and Cheney won the 2000 election, Greenspan writes, “I thought we had a golden opportunity to advance the ideals of effective, fiscally conservative government and free markets. … I was soon to see my old friends veer off to unexpected directions.
“Little value was placed on rigorous economic policy debate or the weighing of long-term consequences.”
The large, anticipated federal budget surpluses that were the basis for Bush’s initial $1.35 trillion tax cut “were gone six to nine months after George W. Bush took office.” So Bush’s goals “were no longer entirely appropriate. He continued to pursue his presidential campaign promises nonetheless.”
Greenspan was criticized intensely for endorsing a large tax cut in 2001, in congressional testimony during the first weeks of the Bush administration.
He notes he was recommending any tax cut, even a smaller one proposed by some Democrats. But he acknowledges that those who had warned him about the perception he was backing Bush’s plan were right. “The tax-cut testimony proved to be politically explosive,” he writes.
By the end of last year, Greenspan writes with some bitterness, Washington was “harboring a dysfunctional government. … Governance has become dangerously dysfunctional.”
He calls Clinton a “risk taker” who had shown a “preference for dealing in facts,” and presents Clinton and himself almost as soul mates. “Here was a fellow information hound. … We both read books and were curious and thoughtful about the world.”
During Clinton’s first weeks as president, Greenspan went to the Oval Office and explained the danger of not confronting the federal deficit. Unless deficits were cut, there could be “a financial crisis,” Greenspan told Clinton.
“The hard truth was that Reagan had borrowed from Clinton, and Clinton was having to pay it back. I was impressed that he did not seem to be trying to fudge reality to the extent politicians ordinarily do.”
Dealing with a budget surplus in his second term, Clinton proposed devoting the extra money to “save Social Security first.”
“I played no role in finding the answer,” Greenspan writes, “but I had to admire the one Clinton and his policymakers came up with.”
Greenspan interviewed Clinton for the book and clearly admires him. “President Clinton’s old-fashioned attitude toward debt might have had a more lasting effect on the nation’s priorities. Instead, his influence was diluted by the uproar about Monica Lewinsky.”
Known for his restrained, if not incomprehensible, public statements over the past several decades, Greenspan’s criticism of Bush and his economic policies comes as the economy is emerging as an issue in the 2008 presidential race.
And the man Greenspan praises so highly for fiscal probity is married to the current front-runner for the Democratic nomination, Sen. Hillary Rodham Clinton, of New York.
The politically charged observations are scattered through the first half of the book, in which Greenspan offers a standard memoir covering his birth through his years as Fed chairman to his retirement in 2006. His theme is the unequaled power of free-market capitalism.
The second half offers a graduate education in global economics that is at times lucid and at times dense.
The Wall Street Journal reported today that the book’s publisher, Penguin, paid Greenspan an advance of more than $8 million.
The book is likely to be mined word by word on Wall Street for clues to how to make billions. Greenspan dives deep into his economic data, his experiences and his philosophy.
He explains how an advanced economy hinges on property rights, the rule of law, a culture of trust, contracts, debt, reputation, self-interest and “creative destruction,” that is, the scrapping of old technologies and processes.
He argues, for example, that the loss of manufacturing jobs — from the steel, automobile and textile industries to computers and telecommunications — “is a plus, not a minus, to the American standard of living.”
He maintains that immigration overhaul, “by opening up the United States to the world’s very large and growing pool of skilled workers,” will help reduce the inequality of incomes.
Without elaborating, he writes, “I am saddened that it is politically inconvenient to acknowledge what everyone knows: The Iraq war is largely about oil.”
For all his wonkish ways, Greenspan writes with delight about his marriage to NBC News correspondent Andrea Mitchell and their travels, friends and mutual love of classical music. He knows how to enjoy a good Vivaldi cello concerto in Venice.
Though cautious about coming decades, Greenspan shows a flash of hope at the end of his memoir. “Adaptation is in our nature,” he writes, “a fact that leads me to be deeply optimistic about our future.”