By William Neikirk
Alan Greenspan's new memoir is tough on Republicans and President Bush and it could be turned into a campaign manifesto for Democrats in certain respects.
According to the Wall Street Journal, the former Federal Reserve chairman writes that the GOP deserved to lose power in Congress last fall because it abandoned its small-government principles and let the budget get out of control.
Congressional Republicans "swapped principle for power," he wrote. "They ended up with neither. They deserved to lose." And though he urged Bush to veto bills to exercise fiscal discipline, the president did not follow through, and that was a "major mistake."
He wrote that the "political operation was far more dominant" in the Bush White House than that of President Ford's where he had served as chief economic adviser. "Little value was placed on rigorous economic policy or the weighing of long-term consequences," he says of Bush's White House.
Indeed, Democrats are criticizing Bush for piling up debt that will hurt future generations.
Greenspan's book will be released Monday, a day before his successor, Ben Bernanke, will decide on whether to cut interest rates to prevent the economy from sinking because of credit problems that developed from a housing bubble when Greenspan ran the Fed. The Journal said it bought a copy at a New York bookstore.
He defended his decision to slash interest rates to as low s 1 percent in mid 2003, which some economists believe caused the bubble. "We wanted to shut down the possibility of corrosive deflation," he said. "We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom or some sort, which we would subsequently have to address…It was a decision done right," according to the Journal story.
Greenspan blamed the housing bubblellargely on a worldwide boom after communism collapsed.
Greenspan received an $8 million advance for his book, "The Age of Turbulence: Adventures in a New World," published by Penquin Press.
Looking to the future, he said inflation will be harder to contain, as the globalization process winds down and imports rise in price. Future Feds may have to raise interest rates to double-digit levels, as former chairman Paul Volcker did in 1979 and early 80s, to keep inflation under control, he said..
Greenspan predicted the central bank "will run into populist resistance from Congress, if not from the White House," just as Volcker did.