Posted on 04/09/2003 11:42:56 PM PDT by patent
| Greenspan lauds Reagan-era reform Fed chief makes no comment on current economy, rates |
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That flexibility included allowing an independent Fed, then chaired by Paul Volcker, to set low inflation targets that risked weakening the economy in the short term -- potentially political suicide, according to the chairman's speech.
"That support began the process that has led today to the virtual elimination of inflation from the U.S. economy," Greenspan said at an event to honor the former president at the Ronald Reagan Library in Simi Valley. A copy of the chairman's speech was made available in Washington.
Reagan nominated Greenspan to fill an empty term on the Fed board in 1987. Greenspan was nominated for the standard 14-year term in 1992.
The Fed chief did not talk about current conditions in the domestic economy or interest-rate policy.
Greenspan and his colleagues next meet to take up monetary policy on May 6. Economists are mixed on whether the central bank will opt to further boost U.S. growth by cutting four-decade-low interest rates again.
According to Greenspan, flexibility also came as Reagan expanded Ford and Carter initiatives to loosen controls on oil markets. Deregulation in finance, trade and transportation was pressed forward, he said.
Finally, Greenspan said he believes the most significant -- and he concedes most controversial -- Reagan step was the 1981 firing of striking air traffic controllers, allowed by law but never carried out by the Executive Branch. It opened the door for "right to work" policies at U.S. companies.
"There was great consternation among those who feared that an increased ability to lay off workers would raise the level of unemployment and amplify the sense of job insecurity. It turned out that with greater freedom to fire, the risks of hiring declined," Greenspan opined. "This increased flexibility contributed to the ability of the economy to operate with both low unemployment and low inflation."
"Whether the average level of job insecurity has risen is difficult to judge, but, if so, some offset to that concern should come from a diminished long-term average unemployment rate," he said.Rachel Koning is a reporter for CBS.MarketWatch.com in Washington.
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