Puppet or Puppet Master?
February 1, 2001 Alan Greenspan's about-face on interest rates and tax cuts might have you wondering if he is simply reacting to his new Commander-in-Chief, or if he is seeing how much he can manipulate the economy. Under Clinton, he was an outspoken opponent of tax cuts—which was what Clinton wanted him to be—and the architect of interest rate rises. And yet, in the last 30 days he has reversed his position on tax cuts and slashed a large chunk from the interest rate increases he had instituted.
Both changes coincided with the change of Administrations and the end of the economic growth that he had been “worried about” for some time. Along with Clinton, he opposed tax cuts; along with Bush he endorses them. Some analysts have suggested that he changed direction to curry favor President Bush, but as economist Richard Salsman noted, Greenspan's “policy at the Fed has caused a near recession.”1 In changing policies, he may only be trying to stave off the death of the economy and his reputation. One is tempted to ask, “Is Greenspan the Puppet Master, changing his policies to control the economy, or is he the puppet, dancing on the strings of political expediency?”
In fact, this is a false alternative. Both puppet and master are dependent on each other. Greenspan has revealed himself as a “second-hander;” a man not of principles but of power—one who chooses his actions according to others, either those who might control him or those that he might control. This is the deeper explanation for his actions. He is not the brilliant economic strategist who can identify the right policy for the right time. Rather, he is a cipher whose sole concerns are appeasing those he cannot control. This is a dangerous man to have controlling our economic future. 1 “Richard Salsman Interview, The Andrew Lewis Show, 1/28/01