All ears when Greenspan talks


By JEANNINE AVERSA

FEDERAL Reserve Chairman Alan Greenspan seems like he's everywhere these days, peering out from black horn-rimmed glasses and waxing on about Social Security, Medicare, deficits, consumption taxes, financial illiteracy, even liquefied natural gas. 

Although owlishly inscrutable when he wants to be, the Fed chief isn't shy about offering his views on all sorts of things. And lately, with his retirement looming, he seems to be on a roll. 

From his early days as a consultant to his current job overseeing the world's largest economy, Greenspan, who celebrates his 79th birthday today, has five decades of experience watching and analyzing economic activity. 

As Fed chairman since 1987, Greenspan has helped steer the economy through good times and bad, earning credibility from both parties along the way. 

Thus, when Greenspan talks –even when it’s not about the direction of interest rates – policy-makers, investors and the public listen. 

“He almost has rock star status,'' said Mark Zandi, chief economist at Economy.com

“He has everything but the groupies.'' 

Some believe his approaching retirement has something to do with his gabby streak. 

Greenspan is expected to retire in January. 

“He is venturing out more,'' said Sung Won Sohn, president and chief economist of Hanmi Bank. 

“He is probably considering his role in history books. He wants to make an impact on major issues while he has the bully pulpit.'' 

In the last few weeks, Greenspan, in appearances before Congress, has, among other things, urged a go-slow approach on personal Social Security accounts, saying that while he embraces the idea central to President George W. Bush's proposed overhaul, he is concerned about stability in financial markets. 

That gave both supporters and opponents of Bush's plan ammunition, hardly the first time something he has said has played both ways in a debate. 

Then on Wednesday, Greenspan delivered to Congress one of his strongest warnings to date. Unless policy-makers reduce the growth of Social Security and Medicare benefits, the resulting huge federal budget deficits in the future could create economic “stagnation,” he said. 

On Thursday, Greenspan jumped into the fray over revamping the tax system. He told a presidential panel that some form of a consumption tax – such as a national sales tax –could spur greater economic growth. But, he cautioned that the government would face significant problems making the transition to such a system. 

While Bush’s economic advisers have talked favourably of a consumption tax, Democrats, who believe it would hit the poor the hardest, were stung by Greenspan’s remarks. So were retailers. 

Some say Greenspan should keep his opinions on matters outside of monetary policy to himself. 

Sen Jim Bunning, a Kentucky Republican, shared with Greenspan, who was facing back-to-back congressional appearances two weeks ago, a “pet peeve.'' 

“You will be asked a number of questions over the next two days that have nothing to do with your job,” Bunning said. 

“I know every time you come here, you are asked every question under the sun. Just remember, you don’t have to answer those questions. You don’t have to testify on subjects that are really not part of the Fed jurisdiction. We will try to suck you in, but please don’t succumb.” 

Senate Minority Leader Harry Reid of Nevada, in an interview on CNN Thursday, called Greenspan “one of the biggest political hacks we have in Washington.'' 

At the Fed helm, Greenspan, a Republican, has served under four presidents. 

The Fed chief’s blessing of Bush’s first tax cut in 2001 gave an important boost to the president's efforts. Congress enacted the massive tax cut. Greenspan and the president credit that stimulus with helping to cushion the blow to the economy from the 2001 recession. 

Greenspan’s strong support for President Clinton’s first-term economic programme, which included a mix of spending cuts and tax increases to shrink the budget deficit, also was critical. 

Greenspan has been beating the drum lately for a return to “pay-as-you-go” policies that would require Congress to offset future increases in government spending or new tax cuts with cuts in other government programmes or tax increases. A decade-long requirement for pay-as-you go budgeting expired in 2002. 

Economists wryly noted that this is one recommendation that seems to be getting ignored on Capitol Hill. 

Greenspan also supports making the president’s 2001 tax cuts permanent, as long as they are paid for. 

Whether it’s healthcare, housing, trade or technology, Greenspan has a position of some sort. 

“He is a very great source of everything economic,” said Richard Yamarone, economist at Argus Research Corp. 

“It would be imprudent not to tap that resource.” – AP  

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