Mad Social Scientist

Because I study central banks, people often ask me what I think of Alan Greenspan. Ordinarily, the head of the Fed does two things: leads a committee that sets interest rates, and oversees regulation of banks. On these duties, I have always said Greenspan has done an above average job.

But Greenspan has a habit of meddling in other parts of the economy where he has no official capacity, leveraging people's esteem for his good work on monetary policy to influence the budget. Here, Greenspan's intervention has been disastrous in recent years. He applied decisive support to Bush's tax cuts with the absurd warning that without them, the national debt would become dangerously *small*. Now, because the debt is growing dangerously large, he wants to cut Social Security---a program on
which he should little or no say in the first place.

I am outraged by Greenspan's behavior, and the following column from Paul Krugman, perhaps my favorite economist, captures this perfectly.

The traditional definition of chutzpah says it's when you murder your parents, then plead for clemency because you're an orphan. Alan Greenspan has chutzpah.

Last week Mr. Greenspan warned of the dangers posed by budget deficits. But even though the main cause of deficits is plunging revenue — the federal government's tax take is now at its lowest level as a share of the economy since 1950 — he opposes any effort to restore recent revenue losses. Instead, he supports the Bush administration's plan to make its tax cuts permanent, and calls for cuts in Social Security benefits.

Yet three years ago Mr. Greenspan urged Congress to cut taxes, warning that otherwise the federal government would run excessive surpluses. He assured Congress that those tax cuts would not endanger future Social Security benefits. And last year he declined to stand in the way of another round of deficit-creating tax cuts.

But wait — it gets worse.

http://www.pkarchive.org/column/030204.html