Greenspan wrong to up interest rates

Alan Greenspan is supposed to be a Republican, but don't tell that to the Bush family. The Federal Reserve Board chairman's handling of interest rates, say many political observers, slowed the 1992 recovery down so that candidate Bill Clinton's charge that the economy was in recession was credible enough for voters to throw President George H.W. Bush out of office.

Now Greenspan is back, cranking interest rates up again at a point in the current recovery that jeopardizes the re-election chances of President George W. Bush, the son. The Fed not only boosted rates a quarter of a point for the second time this year, but promised even more boosts before election day.

The Kerry-Edwards crowd must be dancing in the streets. The Fed's move delighted investors, who were concerned that a too-rapid recovery would heat up inflation, but it's not going to do anything to help the job market, which is Bush's main economic vulnerability.

Investors and financial elitists like Greenspan and other bankers are confident the job market will improve, and they may be right, but whether it will improve in time to help Bush in November, especially in key battleground states, is another matter.

After the 1992 election, Main Street America didn't start feeling as confident about jobs and the economy as Wall Street did until about the time Clinton took the oath of office in January way too late to help the first President Bush.

To be sure, it is not the Fed's job, even if the chairman is a Republican, to manage interest rates in a way to help the GOP win elections. Indeed, partisanship on the part of the Fed would defeat its purpose which is to be independent of politics and to act only in the best interests of the economy.

But raising interest rates now, with consumer confidence and spending down, oil and energy prices soaring and the economy slowing, is the wrong thing to do wrong on its merits, not because of the impact it might have on Bush's re-election.

Overall, Greenspan has done a good job as Fed chairman, but he has on occasion been mistaken before. We think he's making another mistake by boosting interest rates at this time.

Augusta Chronicle, Aug. 12