Alan Greenspan is “one of the biggest political hacks in Washington” declared Democratic Senate Leader Harry Reid this week to Judy Woodruff of CNN.
The soft-spoken four-term Senator continued, “Why doesn’t he respond to the Republicans and tell them the big problem here is the debt that this administration has created? We had a $7 trillion-dollar surplus when Bush took office. Now we have a $3 or $4 trillion-dollar deficit. That’s, in fact, what Greenspan should be telling people.”
Princeton economist Paul Krugman wrote in the New York Times that Greenspan is a “three-card maestro” with a “lack of sincerity” who, “by repeatedly shilling for whatever the Bush administration wants, has betrayed the trust place in the Fed chairman….”
Who is Alan Greenspan and why are people harshly criticizing this 80-year old man? Alan Greenspan is Chairman of the Federal Reserve Board (FRB), the organization that sets US monetary policies. He has served on the FRB since 1987 when he was appointed by Republican President Reagan. His recent 14-year year term expires in January 2006. He is not eligible for another term.
Dr. Greenspan also served on economic advisory boards or positions for Republican Presidents Nixon, Ford and Reagan. Greenspan was born and educated in New York City, where he earned a BA, MA and, 27 years later in 1977, a PhD in economics from New York University. (Interestingly, New York University awarded Greenspan a PhD without required of him a dissertation.)
After earning his MA in 1950, Greenspan became a 20-year follower and close associate of famed philosopher Ayn Rand, author of books as Virtue of Selfishness and Atlas Shrugged. Greenspan wrote many articles for Rand’s newsletters, and authored a chapter in 1966 for a Rand book.
Understanding Ayn Rand philosophy is key to interpreting the Greenspan mindset. Rand espoused a radical economic and political philosophy of individualism, self-interest and egoism. She had a strong dislike for religion and “compulsory charity,” which she believed fostered resentment of individual success.
Ayn Rand created the doctrine of “rational hedonism,” which is supported by unfettered capitalism and the rights of “successful” individuals at the expense of the community. She taught that selfishness was a virtue and that “charity is not a virtue.” She postulated that “happiness” was the natural reward of “success.”
She believed in the diminution of all regulation by the state except for crime control and the judicial system. Most of her literary barbs are aimed at liberals, but she also takes fire at conservatives for not strongly defending “liberty.”
In Capitalism: The Unknown Ideal, co-written by Greenspan, Rand uses the word “altruists” to describe forces of evil that overburden the beleaguered American business community.
When Ayn Rand expressed that government has no obligation to the poor and less fortunate in society, she became an icon to ultra-conservatives worldwide. She was a devout atheist who held the idea of God in contempt. She strongly disagreed with the teachings of Jesus Christ and other early Christians.
She has been labeled a “Social Darwinist” who believed “nature” intended for the
most successful (strongest) to survive, and, unregrettably, the remainder might not survive.
In the 1970s, Alan Greenspan continued work in his own well-connected economic consulting firm, Townsend-Greenspan & Co. and completed his PhD.
Before his appointment to the FRB in 1987, Greenspan served as a director for numerous corporations, including Mobil Corporation, Morgan Guaranty Trust Company of New York, JP Morgan & Co. Inc., and Capital Cities/ABC, Inc.
In his prime in the 1980s and 1990s, Dr. Greenspan’s economic acumen and accuracy were widely honored. He’s been awarded dozens of accolades and honorary degrees. He’s advised many first-rate think-tanks and organizations. He was nicknamed the “economists’ economist” and regarded as the leading authority on US domestic economic policy.
Greenspan solidified his standing as the Great Economic Guru during the Clinton administration. He advised President Clinton to reduce the federal deficit, thereby causing a drop in long-term interest rates.
Bill Clinton listened. Decreased interest rates led to demand for new mortgages, increased consumer spending, an expanding economy, increased employment and a robust stock market. Clinton rode the wave of Greenspan economics into eight years as President and 20 million new jobs, leaving a healthy federal budget surplus.
The Clinton deficit reduction plan passed the Senate 51-50, with VP Al Gore casting the tie-breaking vote. "Not a single Republican had voted for the plan which cut $500-billion from the deficit...by increasing taxes (on the wealthy) and cutting some federal spnding," wrote Bob Woodward. "The only real Republican support had come from Greenspan."
Then George W. Bush squeaked into the presidency in 2001. And with the Bush election, Alan Greenspan’s economic advice grew puzzlingly partisan and his track record became mysteriously spotty.
Just like that of General Colin Powell’s previously sterling advice, above-reproach professional reputation and spotless track record.
In his second term as President, George W. has required all cabinet and inner circle members to sign written oaths pledging loyalty to the President and his ideas. It’s unknown if such an oath was required in any form during his first term.
In 2001, Greenspan gave crucial support to Bush’s tax cuts for the rich, when virtually no one else, except ultra-conservatives, endorsed the concept. As everyone now acknowledges, those tax cuts are hugely responsible for today’s monstrous budget deficit, presently about $412 billion.
In 2005, Greenspan is the lone economic voice urging Americans to adopt the program that George Bush desperately desires……Bush-style privatization of Social Security.
Alan Greenspan says he supports privatization of Social Security despite his admissions that:
1. Social Security will not increase overall national savings.
2. Private accounts will do nothing to save Social Security.
3. Greenspan does not endorse borrowing trillions of dollars to finance Social Security privatization.
4. Expanding 401(K)s are a better idea.
What’s the deal with Alan Greenspan in the 21st century? Why is he defying his own wise advice from the past? The plain truth is…we don’t know. But here are a few suggestions.
Loyalty, felt or enforced, to President George Bush’s political goals;
Loyalty to his many close Wall Street friends who will benefit richly from Social Security privatization;
OR……. Eighty years old this week, in his last year as Fed chairman, and probably his last year with significant economic policy-making power, perhaps Dr. Greenspan wants to take this last chance to strike a blow for Ayn Rand and her economic philosophy of rewarding the “successful,” and letting the rest struggle to survive.
Ayn Rand and Charles Darwin would be proud. George Bush, too.