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April 27, 2005

The Greenspan Succession

Greg Ip writes:

WSJ.com - Finding Someone to Fill Greenspan's Shoes. By GREG IP, Staff Reporter of THE WALL STREET JOURNAL: Sometime in the next nine months, President Bush will make one of the most important appointments of his presidency, one that history suggests will affect the economy in the U.S. and abroad long past the end of his term: Selecting a successor to Federal Reserve Chairman Alan Greenspan... three front-runners, all with sterling academic pedigrees: Martin Feldstein... Glenn Hubbard... and Ben Bernanke, 51.... [T]he White House will likely seek a successor who reassures the markets while being philosophically attuned to Mr. Bush's overall economic agenda. The chief job of the Fed chairman is to set interest rates, but -- especially under Mr. Greenspan -- the Fed chairman also has emerged as the arbiter of sound fiscal policy, and Mr. Bush is likely to steer clear of someone he thinks would criticize his budget policies.... Mr. Feldstein may have the edge in economic stature and political experience.... In an interview, Mr. Feldstein says the deficit is much smaller today as a share of gross domestic product than it was in the early 1980s, and it will likely decline further even if the tax cuts are made permanent, provided the administration is "even reasonably successful" in controlling discretionary spending.... Mr. Hubbard, as chairman of Mr. Bush's Council of Economic Advisers from 2001 to 2003, won admiration for his discipline and work ethic on issues ranging from the West Coast dockworker lockout to the 2003 dividend-tax cut. He was known for getting his staff to quickly draft authoritative policy memos for White House decision makers. "He earned his way into the Oval Office," says a former administration official.... Mr. Bernanke conducted research on monetary policy at Princeton University before joining the Fed in 2002. Since then, his plain-speaking style, numerous speeches and copious research have made him second in prominence at the Fed only to Mr. Greenspan. He recently said the hardest part of moving to the Fed was having to wear a suit: "My proposal that Fed governors should signal their commitment to public service by wearing Hawaiian shirts and Bermuda shorts has so far gone unheeded."... There could be several dark-horse candidates. Donald Kohn, a longtime Fed staffer and now governor, is well placed to emulate Mr. Greenspan but he is a political independent. Consultant Lawrence Lindsey has close ties to the White House and was a Fed governor, but his record as Mr. Bush's first National Economic Council director was mixed. John Taylor is a prominent monetary-policy scholar but he didn't leave a big mark in the four years he just spent as Treasury's top international official...

My view is that Bernanke is the best qualified: monetary policy is and has been his thing for his whole career.

Posted by DeLong at April 27, 2005 08:35 PM