Semi-Daily Journal

Power Struggle in the Degenerate Ottoman Sultanate II

As merchants and passers-by in Old Constantinople would hear screams and thuds from the Topkapi Palace, so we read in our media faint echoes of a struggle inside the White House over which economic policy faction will gain the ear of our underbriefed President.

Past echoes of the screams and thuds have come from International Economy, the Wall Street Journal, Robert Novak, Business Week, and others. Today's echoes come from the G-7 Group's (very valuable, although usually much less entertaining) daily email:

US Fed : Whither Greenspan?

We can't help but wade into the debate over Alan Greenspan's imminent demise. It isn't happening. Bloomberg, Business Week, and Robert Novak have each contributed to a cyclone of speculation about whether President Bush will fire Greenspan. He won't. Sure, some administration insiders are angry that he didn't find a better way to couch his longstanding opposition to deficits in a way that might sound less critical of the reduced taxes paid on dividends that Greenspan supports in principle. But that isn't grounds for dismissal.

And what about this speculation that Council of Economic Advisers chief Glenn Hubbard is about to ascend the throne? We don't think so. Hubbard, who came to the administration with lots of promise, squandered a good deal of it by working to undermine then Treasury Secretary Paul O'Neill, National Economic Council adviser Larry Lindsey and others like Undersecretary John Taylor and NSC advisor Gary Edson. You can't alienate that many people and still have the confidence of the overall Treasury. So Hubbard has been threatening to return to Colombia University, from whence he came. We don't see him getting the deputy Treasury slot that he so desires, never mind the chairmanship of the Federal Reserve.

If Greenspan leaves it will be because he decides to step down. We can't imagine that happening before his term expires next year. He'll be 78 then, and may decide to move on. But the notion that the Bush activists would sack him, or deny him the second term he wants, scarcely passes the laugh test.

Bottom Line: Greenspan will remain at the Fed as long as he wants to. Sure, some in the administration would prefer a strong advocate of the Bush tax package. But not at the cost of roiling the markets a few months before the 2004 elections...

I agree with the G-7 Group's analytical conclusions: at the start of July 2004 George W. Bush will face the choice between reappointing Greenspan and having the vote to confirm the next Fed Chair slide until the Congress's post-election session in November. Only a real idiot would fail to renominate Greenspan (or his designated successor) if the alternative is a 50-50 chance that the next Fed Chair will be chosen by a Democratic President-Elect.

But I cannot help that the tone carries more interest here than the substance. The tone tells us that the knives are really out of their places hidden under the robes now, flashing, and covered with gore. Somebody leaking to the G-7 Group really doesn't like Glenn Hubbard, who, "...with lots of promise, squandered... it by working to undermine then Treasury Secretary Paul O'Neill, National Economic Council adviser Larry Lindsey and others like Undersecretary John Taylor and NSC advisor Gary Edson. You can't alienate that many people and still have the confidence of the overall Treasury..." Who doesn't like Glenn Hubbard anymore (besides Gary Edson, John Taylor, Larry Lindsey, and Paul O'Neill, that is)? I have no idea.

And I also have no idea who the factions really are: clearly my (previous) theory that there were two and only two battling inside the White House for the President's ear--for the position of Grand Economic Policy Vizier--was overly simplistic...