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Economy moves into spotlight

Bush probably can't count on Greenspan's support on stimulus package

Posted: Sunday, January 13, 2002

WASHINGTON -- Trying to keep a nation behind him during war and recession, President Bush turned again to Alan Greenspan for help in pushing his economic policies. The Fed chairman may not be forthcoming this time.

Greenspan's support eased the way for Bush's $1.35 trillion tax cut last year. The government's fiscal picture has since deteriorated, however, under the weight of the recession and increased spending on the military and domestic defense.

It is improbable that Greenspan will back further large tax cuts or the stimulus package being pushed by Bush, suggested administration officials and business leaders.

With Bush's plan stalled in the Senate and partisan temperatures rising in a congressional election year, the reassuring image of Greenspan cooperating with Bush is one the president's advisers want to promote. But the picture isn't quite coming together.

After inviting Greenspan to the White House last week to discuss the economy, Bush shielded him from reporters' questions. ''He's an independent soul, and he can have a press conference elsewhere,'' Bush said.

He wanted Greenspan at his side, not upstaging him. ''You can find him at his place of business,'' the president said.

A few blocks from the White House, the Federal Reserve has been Greenspan's address for 14 1/2 years -- more than two years longer than Franklin D. Roosevelt's presidency and longer than any other Fed chairman but one.

Reports circulated last summer that Greenspan, 75, might retire before his term is up in June 2004. But such talk has subsided since the Sept. 11 terror attacks, and the recession it exacerbated.

Still, there's little doubt that Greenspan's image has been tarnished. Many economists contend he waited too long before starting to cut interest rates.

''He lost the confidence of Wall Street and he lost the confidence of Bush,'' said Michael Evans, chief economist for American Economics Group. ''Bush had hoped that Greenspan would speak up and say good things about further tax cuts, and Greenspan apparently doesn't want to. And Wall Street thinks the guy has lost his way.''

Greenspan admirers -- and there are many -- still hold him in high regard, even if some seem less enamored than before.

''That's mostly because they thought he walked on water, and he only swims,'' suggested David Wyss, chief economist for Standard and Poors. Wyss still considers Greenspan ''the best Fed chairman we've had.''

Republican strategists know that the longer the recession lasts, the harder it will be to argue that Bush inherited it. Democrats already are exploiting that vulnerability.

A downturn in 1982 undercut then-President Reagan's popularity and helped produce a 25-seat Republican loss in the House that year.

This midterm election year begins with more Americans worried about the economy. ''As people's worries about threats overseas and terrorism here recede, the economy and its problems are coming front and center,'' said pollster Andrew Kohut of the Pew Research Center.

Greenspan's ratings remain high, despite ''punditry which is somewhat less positive than was the case in the late 1990s when he was deified,'' Kohut said.

The Bush family's views toward fellow Republican Greenspan remain ambivalent.

Even though President George H.W. Bush reappointed Greenspan, he later blamed the central banker's tight monetary policies for the recession that contributed to his 1992 re-election defeat.

Until now, the younger Bush has worked hard to court Greenspan. The courtship now seems destined for some rocky times.

Greenspan soon will appear on Capitol Hill, beginning with testimony Jan. 24 before the Senate Budget Committee.

''I'm sure he's going to be asked, by some of the Democrats particularly, whether it would be appropriate to scale back those (Bush) tax cuts,'' said Lawrence Chimerine, president of Radnor Consulting, an economics firm in Philadelphia. ''He's going to have to deal with the issue of how supportive he should be on tax cuts when he knows the budget outlook has changed so dramatically.''

Greenspan has not yet taken a public position.

Meanwhile, after cutting interest rates 11 times last year to a 40-year low, there's not a lot more the Fed can do to spur the economy.

Tom Raum has covered Washington for The Associated Press since 1973, including five presidencies.



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