Economy: Wrath of the Maestro

In his new memoir, The Age of Turbulence, former Federal Reserve chairman Alan Greenspan takes the Bush administration and the 109th Congress to task for their stewardship of the American economy and the federal budget.

SEPTEMBER 24, 2007 by Faiz Shakir, Amanda Terkel, Satyam Khanna,
Matt Corley, Ali Frick, and Jeremy Richmond
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Wrath of the Maestro

In his new memoir, The Age of Turbulence, former Federal Reserve chairman Alan Greenspan takes the Bush administration and the 109th Congress to task for their stewardship of the American economy and the federal budget. Many former administration officials have criticized Bush after leaving office, but as the New York Times notes, Greenspan “is in a different class, by dint of his fame, his economic authority and his service across party lines. His critiques are likely to have more resonance among Mr. Bush’s base.” When the Bush administration first took office, Greenspan, a self-described “libertarian Republican,” said he “thought we had a golden opportunity to advance the ideals of effective, fiscally conservative government and free markets.” But the former Federal Reserve chief was soon disappointed to find out that under the new President, “little value was placed on rigorous economic policy debate or the weighing of long-term consequences.” In his book, Greenspan “paints a picture of [President] Bush as a man driven more by ideology and the desire to fulfill campaign promises made in 2000, incurious about the effects of his economic policy.” “Most troubling to me was the readiness of both Congress and the administration to abandon fiscal discipline,” writes Greenspan. “They swapped principle for power.”

“My biggest frustration remained the president’s unwillingness to wield his veto against out-of-control spending,” Greenspan writes. This was a problem for Greenspan, according to the Washington Post’s Bob Woodward, because the conservative-controlled Congress was “too eager to tolerate excessive federal spending in exchange for political opportunity.” Bush was either unable or unwilling to cross the congressional leadership, according to one former aide, Peter Wehner, who says that “when [Rep. Dennis] Hastert was speaker, one of his red lines was that he did not want any spending bills vetoed.” As a result, before 2006, when his party lost control of Congress, President Bush never vetoed a single spending bill. Bush’s reluctance to hold his ideological allies in line was especially worrisome for Greenspan because “House Speaker Hastert and House majority leader Tom DeLay seemed readily inclined to loosen the federal purse strings any time it might help add a few more seats to” their governing majority.

When Bush entered office, he inherited a $128 billion federal surplus that was projected to grow even larger. In congressional testimony, Greenspan supported Bush’s 2001 tax cuts, though not necessarily their size. But the tax cuts proved negative because they were “unmatched by decreased spending, and, in the wake of September 11, still more open-handed spending.” By 2004, Bush had managed to create a record deficit of $413 billion in fiscal year 2004. Contrasting Bush’s deficit-laden record with President Clinton’s surplus, Greenspan criticizes Cheney’s contention that “deficits don’t matter,” arguing that belief “became part of the Republicans’ rhetoric.” “Deficits must matter,” Greenspan asserts, because “uncontrolled government spending and borrowing can produce high inflation ‘and economic devastation.'” The increased federal debt endangers America’s economic independence while also increasing the trade deficit. Bush’s “policies continued in place irrespective of what was happening to the surplus,” Greenspan told CBS recently. “I don’t know if it was rigid,” he said. But “it was wrong.”

REJECTING GREENSPAN’S CRITICISM: In a press conference last week, Bush refused to answer questions about the state of the economy, deferring to economists because he “got a B in Econ 101” (though he actually received a C-). But this admitted lack of economic expertise did not stop him from dismissing Greenspan’s criticism of his fiscal stewardship. “I would respectfully disagree with the characterizations” of the former Federal Reserve chairman, Bush told Fox News last week, arguing that his own “fiscal record is admirable and good.” In a Wall Street Journal op-ed, Cheney claimed that Greenspan’s “assessment is off the mark” because, in his words, “President Bush’s record is superb.” Conservative columnist Robert Novak was even more aggressive in his pushback against Greenspan’s depiction of the Bush economic record, saying recently that Greenspan revealed himself “as a Democrat” who “loves tax increases,” but “detests the Bushes.”

A SHORT-SIGHTED POLICY: Responding to Greenspan’s criticisms, White House spokesman Tony Fratto defended Bush’s tax cuts. “Those tax cuts accelerated growth over time leading to increased business activity, increased job growth and increased tax receipts,” argues Fratto. “Which today has us at low historic deficit levels and on a path to a surplus.” But his assertion is contradicted by the numbers crunched by the Congressional Budget Office (CBO). While “CBO’s projections confirm that the deficit for the current year will be smaller than had been anticipated earlier this year,” they “offer no support for the claim that the President’s tax cuts are boosting the economy and significantly improving the budget outlook for coming years.” Not only did “the cumulative budget deficit from 2008 to 2012 increase…sharply from $194 billion to $696 billion in the CBO’s projections,” but the Joint Committee on Taxation estimates that in 2007 “the federal government would…have shown a surplus had it not been for President Bush’s tax cuts.” Greenspan argues that while Bush can point to some momentarily positive economic developments, his policies are on course for disaster in the long run. “We are on a cash accounting basis, so the big commitments we have made don’t show up as deficits for many, many years,” Greenspan said. “But you shouldn’t do planning on a cash budget. Corporations stopped doing that 150 years ago.”


IRAQ — RIGHT WING CONTINUES TO OBSESS OVER MOVEON AD, OBSTRUCTS EFFORTS TO END WAR: While U.S. troop deaths in Iraq creep toward 4,000, conservatives are using MoveOn’s recent Gen. David Petraeus ad to obstruct progress in ending the war. Last week, the Senate voted to approve Sen. John Cornyn’s (R-TX) bill criticizing the ad. The “sense of the Senate” resolution “strongly” condemned the “personal attacks on the honor and integrity of General Petraeus.” But the senators who supported Cornyn’s bill have previously chastised the Senate for engaging in “empty” and “meaningless resolutions.” “We have just seen a procedure in the last 24 hours that was a colossal waste of time,” said Sen. Arlen Specter (R-PA) in July. Last week, President Bush used the opportunity to attack Democrats, stating, “Most Democrats are afraid of irritating a left-wing group like, or more afraid of irritating them than they are of irritating the United States military. That was a sorry deal.” On CNN’s Late Edition yesterday, Sen. Hillary Clinton (D-NY) responded, “Well, I thought it was pretty sorry when his campaign attacked Senator Kerry’s record of service, and I thought it was pretty sorry when the Republicans attacked Senator Cleland. I don’t condone attacks by anyone on the patriotism and service of our military.” In the meantime, conservatives helped block the Levin-Reed amendment that would call for a withdrawal from Iraq. A recent CBS poll found that after Petraeus’s testimony, the percentage of Americans who believe escalation is working fell from 35 to 31. An overwhelming majority of Americans favor a withdrawal from Iraq.

ENVIRONMENT — BUSH TO SKIP U.N. TALKS ON GLOBAL WARMING: Roughly 80 foreign leaders will travel to New York City this week to attend U.N. talks on how to combat global warming. President Bush has announced that he will not be there for any of the talks, but will make it to the dinner that closes the conference. While the U.N. talks are occurring, Bush will be holding his own meetings that have “the same stated goal, a reduction in the emissions blamed for climate change, but a fundamentally different idea of how to achieve it.” James L. Connaughton, the president’s chief environmental adviser recently said that “each nation has the sovereign capacity to decide for itself what its own portfolio of policies should be.” This move raises the prospect that Bush could once again put the U.S. “in the position of objecting to any binding international agreement intended to slow or reverse the emissions linked to rising temperatures.” At the most recent G-8 summit in June, Bush rejected German Chancellor Angela Merkel’s aggressive climate change proposals, “whereby global temperatures would be allowed to increase no more than 2 degrees Celsius before being brought back down.” Instead, the Bush administration advocated “voluntary” cuts of greenhouse gases.

JUSTICE — U.S. ATTORNEY UNDER INVESTIGATION FOR ABUSE, RETALIATION: Rachel Paulose, the U.S. Attorney in Minnesota, is the subject of an investigation by the U.S. Office of Special Counsel into allegations that she used racist epithets against an employee, mishandled classified information, and retaliated against staffers. Yesterday, the Washington Post reported that “an internal Justice Department audit completed last month said her employees gave her very low marks. … Her performance review was so poor that Kenneth E. Melson, head of the department’s Executive Office for U.S. Attorneys, took the unusual step of meeting with her in Minnesota several weeks ago.” Paulose’s tenure, less than a year old, has been rocky from the start. In April, one of her assistant U.S. attorneys “and two other senior attorneys resigned their management positions, saying they did not want to work for her,” complaining about her “highly dictatorial style” of management. On Friday, Reps. Keith Ellison (D-MN) and John Conyers (D-MI) sent a letter to the Department of Justice requesting documents relating to her hiring. The representatives asked whether Paulose’s predecessor was forced out or resigned voluntarily and whether Paulose’s appointment was “based on ‘political loyalty’ and part of a broader strategy to suppress voter turnout.”


Pope Benedict will use his first address to the United Nations to “deliver a powerful warning over climate change in a move to adopt protection of the environment as a ‘moral’ cause for the Catholic Church and its billion-strong following.”

A classified Pentagon program has attempted to “bait” Iraqi insurgents by planting items such as detonation cords, plastic explosives and ammunition, and then killing Iraqis who pick them up. Experts worry that such a baiting program “raises troubling possibilities, such as what happens when civilians pick up the items.”

The closure of the Guantanamo Bay detention facility looks “increasingly unlikely.” President Bush, “who last year told German television that he ‘would like to end Guantanamo,’ is now threatening to veto any move to ‘micromanage the detention of enemy combatants.'”

In the days after 9/11, Attorney General nominee Michael Mukasey dismissed concerns by a 21-year old Jordanian immigrant that he had been beaten while in U.S. custody, leaving bruises that were hidden beneath his orange prison jumpsuit. “As far as the claim that he was beaten, I will tell you that he looks fine to me,” said Judge Mukasey.

“In the corruption trial of former [Alaska] House Speaker Pete Kott, a former Veco executive testified that the oil field services company routinely paid for all or parts of political polls — usually at the request of candidates. The FBI is currently investigating Sen. Ted Stevens’s (R-AK) ties to former Veco chairman Bill Allen.

“A coalition of prominent civil rights groups is making a last-ditch push to derail controversial Federal Election Commission nominee Hans von Spakovsky less than a week before he faces a crucial test in the Senate.”

And finally: CBS reporter Mike Flannery was pushed by an aide to Rep. Jerry Weller (R-IL) when trying to ask the congressman questions about his “controversial Latin American land deals.” “There’s a large man, who begins shoving reporters around, including yours truly. … There’s an opening in the doorway, and I begin moving through that doorway, and he shoves me down the stairs,” Flannery said. He later called the staffer a “goon.” Watch a video HERE.

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In the first appropriations season since Congress moved to require members to attach their names to earmarks, the “number and overall cost of congressional pet projects added to the national defense budget are both down sharply.”


NEW YORK: New York, home to more than 500,000 undocumented immigrants, will now issue driver’s licenses without regard to immigration status.

CALIFORNIA: Gov. Arnold Schwarzenegger (R) works with progressives to provide universal health coverage.

MISSOURI: A “high-profile court battle over a new Missouri abortion law” places spotlight on regulations that could put abortion doctors out of business in 28 states.


THINK PROGRESS: The Brookings Institution’s Michael O’Hanlon’s conflict of interest revealed in Fox News’s one-hour special on Gen. David Petraeus.

AMERICA BLOG: Members of the D.C. chapter of, a far-right web organization, are invited to the White House for a picnic.

DESMOG BLOG: Anti-climate change paper rejected by climate skeptic’s journal.

A TINY REVOLUTION: Former Federal Reserve Chairman Alan Greenspan: Saddam Hussein was “far more important to get out than bin Laden.”


“When pressed on whether he was talking about a post-surge Plan B, [President] Bush answered: ‘Actually, I would call that a plan recommended by Baker-Hamilton, so that would be a Plan B-H.'”
— Washington Post’s David Broder, 5/31/07


“In an interview with a group of columnists that I attended Wednesday, [Bush] dismissed the notion of establishing the 2006 recommendations of the Iraq Study Group as official U.S. policy.”
— Roll Call’s Mort Kondracke, 9/19/07

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