Kudlow’s Money Politics

Carter, Clinton & Alan Greenspan

Greenspan is yapping again.

The latest former Fed chair flap occurred in Japan, where he softened his recession forecast from Sunday to yesterday by downgrading it from a ‘probability’ to a ‘possibility.’

This contrasts with his successor, current Fed Chairman Ben Bernanke, who informed Congress yesterday that the economy could withstand a housing and inventory correction and achieve a soft landing.

What we’ve got here are two different views from the Fed Chairmen.

Greenspan has two main concerns. His first seems to be that business expansions run out of steam after about five years. He’s also worried about the budget deficit.

His first point is highly dubious. President Reagan’s expansion lasted almost eight years. The 90’s Papa Bush/Clinton expansion lasted a decade.

In other words, in this modern era of low tax rates, deregulation, low inflation and low interest rates, along with high productivity from the burst of technological entrepreneurship, our rejuvenated free market American capitalist system has shown that expansion cycles can go on for longer than Mr. Greenspan allows’”more like 8-10 years.

In fact, over the last quarter century we have had only six negative GDP quarters, and the most recent recession, in 2001, was shallow and short-lived.

The present Bush boom expansion is slightly more than five years old. So I would reckon that in the new era, launched by the Gipper 25 years ago, we have another 3-5 years to go in the growth cycle.

Why is Alan Greenspan ignoring all this evidence? Why is he second-guessing Ben Bernanke? Former Fed Chairman Paul Volcker never second-guessed Greenspan when he was replaced in 1987. Why Greenspan is doing all this is beyond me.

It seems like lucrative speech-fee troublemaking to me.

Or is Greenspan promoting his book due out in September? Maybe he’s trying to match Bill Clinton’s $40 million in speaking fees? Perhaps he’s playing the Jimmy Carter game, where the former peanut farmer tirelessly attacks Republican President George W. Bush, and who before that, constantly criticized Papa Bush and Ronald Reagan?

All this stuff from Greenspan, Clinton, and Carter is a new low in bad manners. It is totally unseemly.

And what’s with Greenspan’s obsession with the budget deficit? High growth tax collections are exploding right now. The budget deficit is falling like a stone in the aftermath of Bush’s supply-side tax cuts four years ago.

The bottom line here is that not only is Mr. Greenspan’s economics half-cocked, but his second-guessing for speech fees is, well, just plain rude. The institution of the U.S. Fed does not need to be second-guessed, nor does its new chairman need to be undermined by Mr. Greenspan’s speech for money calendar.

In fact, if I didn’t have such a high regard for Alan Greenspan, who has been a personal acquaintance for three decades, I would describe his current behavior as ‘Clintonian’ or ‘Carteresque.’

This is all wrong.

Larry Kudlow — Larry Kudlow is the author of JFK and the Reagan Revolution: A Secret History of American Prosperity, written with Brian Domitrovic.

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