The New Republic believes that Alan Greenspan should never opine about his belief that the proper size of government is smaller than the one we have--although he should condemn budget deficits twice a day:
The New Republic Online: As the chairman of the Federal Reserve, Alan Greenspan has every right to opine about the wisdom of running deficits: Persistent deficits drive up long-term interest rates (since they lower the supply of national savings), and they can be inflationary if the government prints money to finance them. Since both of these things directly impinge on Greenspan's ability to fulfill his mandate to pursue price stability, full employment, and moderate long-term interest rates, it would be remiss on his part not to comment on deficits. But there's nothing in the Fed's mandate that requires the Fed chairman to weigh in on what are essentially political questions: namely, what is the proper size of government? To the contrary, as this question has everything to do with political ideology and little to do with economics (at least at the margins, obviously a hugely bloated public sector is a drag on growth, as is a nonexistent government sector), you would expect an ostensibly apolitical official like Greenspan to keep his mouth shut on the matter. Alas, for Greenspan the temptation is apparently too great....
If asked, Greenspan would probably say that he wasn't weighing in on the desirability of this or that level of federal spending, just specifying that if you're going to cut taxes you should also cut spending, since otherwise you end up running persistent deficits. Greenspan, in other words, would probably claim he was making an essentially positive statement about the connection between persistent deficits and economic growth, rather than a normative statement about the size of government. But that's decidedly not what he ended up doing. Though we only have the Times account to go on (no transcript available yet), Representative Bachus seems to have asked Greenspan whether tax cuts were "good" if they were offset by spending cuts, to which Greenspan assented. He did so despite the fact that, from his perspective as chairman of the Federal Reserve Board, tax cuts are neither good nor bad. Only deficits or the absence of deficits are good or bad--and they're good or bad regardless of the level of government spending they happen to coincide with...
Nonsense. Alan Greenspan is not the Queen of England, constitutionally forbidden from making any expression of approval or disapproval for any policy not expressly required for the occupant of his particular role in the government. Congress has the constitutional power to hold hearings, has the legal requirement (imposed by the Humphrey-Hawkins Act) to hold hearings at which the Federal Reserve Board Chair is to testify, and has the power to ask whoever it wants whatever questions it wants--and they have the obligation to answer. Alan Greenspan is Chair of the Federal Reserve. But he is not constitutionally obligated to throw away the rest of his mind and to refuse to answer questions that do not directly address the sphere of responsibility of the Chair of the Federal Reserve.
Bear in mind one thing: ALAN GREENSPAN IS A RANDITE. Much of Greenspan's thought was formed during his long-term close intellectual encounter with Ayn Rand. OF COURSE Greenspan believes that our current social-insurance state domestic government is way too big--that's what a Randite believes.
Alan Greenspan is not a social democrat. So do not be surprised when he does not act like one, and do not claim that it is in any way illegitimate for him to say things that a social democrat would not say.
Posted by DeLong at July 17, 2003 12:33 PM | TrackBack
Well done! There's nothing so pleasing as intellectual honesty.
What would TNR have Greenspan do, claim that 2 + 2 is 5? He was asked a question and answered it truthfully, and one would hope he'd be just as truthful, were he to be asked if tax cuts that aren't offset by spending cuts were a good thing - and in fact I recall him already saying they are not.
I don't see this as being so much an issue of "social democracy" as it might seem at first blush. One can certainly conceive of a state of affairs in which government as a share of American GDP was much smaller than it is, but instead of all sorts of public schemes, direct transfers were used to guarantee minimum incomes for everyone. Under such a scheme, income inequality could be even smaller than it is at present, and individual welfare would almost certainly be greater - for instance, if I wanted to spend my food stamp allocation on the Shorter Oxford English dictionary, I would be free to do so.
The confusion between means and ends is one I find all too common on the left, though certainly not on this forum. That one can obtain social democratic outcomes without pandering to producer interests, or commandeering huge swathes of the economy, is a fact that is becoming increasingly central to the political debate in the United Kingdom at least - for which we have the monolith called the National Health Service to thank.
Posted by: Abiola Lapite on July 17, 2003 03:17 PMThe Queen of England was never under any such constitutional restriction. Mind you, there hasn't been one since 1707 when England was constitutionally subsumed into the UK.
Posted by: P.M.Lawrence on July 17, 2003 04:00 PMThe article mistakes the Chairman of the Fed for the director of the CBO. AG is parisan if nothing else and his willingness to be a political hack is his worst fault.
Case in point is supporting the 2001 tax cut. When the stock market was booming under Clinton it was irrational exuberance and at the end kill the economy to pop the bubble. Now with the new stock bubble, AG is saying how good it is that stock prices are going up and nothing about the obvious fact that a new stock bubble has appeared. He is also ignoring the housing bubble.
Personally, I would rather have AG speak out because we are reminded how truly partisan he is.
A Randite? I thought they were fictional characters out of ancient legends. Do you mean that there are some still living?
Posted by: bakho on July 17, 2003 07:09 PM"AG is saying how good it is that stock prices are going up and nothing about the obvious fact that a new stock bubble has appeared."
How is it "obvious" that "a new stock buble has appeared"? Do you really mean to say "I don't like this administration, and I therefore refuse to accept that a recovery is underway during it's tenure"?
Posted by: Abiola Lapite on July 17, 2003 08:58 PMApparently, Greenspan has "an obligation to answer" only if it pleases him to do so. When Congressman Frank asks a question, for instance, it does not always please Greenspan to answer. Back when Henry Gonzalez ran Fed oversight hearings, he had little patience with such choosiness. Of course, Henry had little patience -- full stop. Nobody in a position to do so is going to charge Greenspan with being in contempt of congress for refusing to answer questions directly, but he probably was, in fact, in contempt in his dealings with Frank this time.
Posted by: K Harris on July 18, 2003 06:17 AMYou're correct, bakho. The term Brad was looking for is "randroid". I'm sorry to say that randroids all too real. The upside is that they're mostly comical rather than frightening. I'm sure one will be along any minute to entertain us.
Posted by: Keith M Ellis on July 18, 2003 03:07 PMIf asked in October, 2004, whether or not it is in the best interest of the country that George W. Bush be reelected, should Alan Greenspan testifying in his role as Chairman of the Federal Reserve Board give an answer?
Posted by: CMike on July 19, 2003 12:42 AMWhy not? AGs answer would be yes. He is a partisan Republican. To understand what he is saying it helps to know as much about him as possible, especially his political views since they are closely linked to his economic views. AG still buys the mythology that the GOP is the party of good fiscal policy. But the GOP is the party that gave us Herbert Hoover. Goldwater was a balanced budget type, but ever since Reagan, the GOP has been the party of profligacy. Now the GOP has been taken over by Right Wing Southern Rednecks. Getting the GOP to back a reasonable fiscal policy is hopeless. They would rather shut down the government than vote for a reasonable budget.
Posted by: bakho on July 19, 2003 03:49 PMEveryone has political beliefs. However, some government offices require the holder to conduct him/herself as a nonpartisan publicly and when executing the duties of office.
Supreme Court justices are not to write editorials supporting or opposing Court nominees. FBI and CIA directors are not to opine about candidates in national or local elections. Joint chiefs do not respond in a public forum about the shortcomings of a civilian superior.
The ability to recognize and avoid partisanship and political process influence is an essential attribute for the holder of a nonpartisan office.
The Chairman of the Fed has narrow responsibilities. These do not include advocating the moral benefits of income distribution schemes, the proper size of medicare, the proper income level cut off for FICA contributions, etc.
Posted by: CMike on July 19, 2003 07:17 PM"A Randite? I thought they were fictional characters out of ancient legends. Do you mean that there are some still living?"
And what is the difference between a Randite and a libertarian?
Posted by: Mark Bahner on July 22, 2003 09:47 AM