To be sure, there are few times in our congressmen’s lives that they look as stupefied as when Alan Greenspan comes to visit them on Capitol Hill. But as tax-cut-hungry Republicans in the House and Senate blinked their way through the Fed chairman’s testimony on the last two Wednesdays –- testimony in which Greenspan repeatedly shot down the idea of massive tax cuts -- one sensed that another question besides "huh?" was nagging at them this time. Namely, wasn’t this guy supposed to be a Republican?
Bill Clinton has made triangulation history with his six-year sidle into the heart of what was once a Republican fiscal conservatism, but it was Mr. Greenspan, with arms akimbo and foot a-tapping, who was waiting for the president when he got there. In 1992 Greenspan told Clinton in un-opaque terms that the tax-cut inauguration party Clinton was planning would immediately be met by a punitive/precautionary hike in interest rates. Clinton listened -- Greenspan, after all, had just rate-hiked George Bush right out of office (at least that’s how Bush tells it). Clinton’s economy-stupid presidency has charted a course for the Fed lighthouse ever since.
These days, Americans’ trust is in the markets, and the markets’ trust is in Greenspan, and so Americans trust in Alan Greenspan, more so perhaps than any official -- elected or not -- in decades. So it was too bad for Republicans when Greenspan, on successive Wednesdays, said exactly what most voters seem to privately think about an $800 billion tax cut of any shape: "Probably we would be better off holding off."
Republicans, mind you, are just trying to help. They’re for small government -– a good thing by most reckonings, and especially by the Fed’s –- and for giving American consumers back, out of the government newly-teeming annual coffers, some of what they’ve been consuming so furiously to put in. It’s their economy, stupid; they made the boom, with some help from Asian imports and Robert Rubin, and wouldn’t it be nice for the GOP to show its appreciation (and hopefully win a few elections) by cutting America a check?
Bill Clinton, for one, is shocked and appalled that those bad men would try to do such a thing. After all, he’s not keeping the surplus to pay off his Paula Jones legal bills; he’s just reinvesting it. "The Senate is about to make a pivotal choice: whether to move forward with a sound strategy that led us to this point, or to return to the reckless policies that threw our nation into stagnation and economic decline," boomed the president on Thursday. That last part, of course, is a canard. The last big tax cut was the Reagan mammoth of 1981, and though it did plunge the budget into $200 billion deficits, it also pulled the economy out of stagnation and economic decline, and laid the foundation for the '90s boom that today is paying those deficits off.
But he’s right about the "sound strategy." And Greenspan knows it, and you get the feeling that eight years ago, the GOP would have known it too. The tax cut is too damn big. It’s supposed to differentiate the Republicans from the Clintoncrats, and it certainly does. The problem is that all those years of rightward, ho! has left Clinton as the fiscal conservative (with a Reagan-appointed Fed chairman on his side) and Republicans as the fiscal profligates. The boomers already got their money in 1981; now that they’ve got leftovers, they want to squirrel some of it away for when they get old. For when their kids get old. To pay down the debt they ran up then, beating stagflation and the Russians. What the Republicans are offering now is what everyone needed -– and already got -– 18 years ago.
The GOP leadership maintains that they can do it all –- save Social Security, save Medicare and slash taxes –- and yet few, including moderates in their own party, seem to believe that. And Greenspan may have hit upon the reason why: this multi-trillion-dollar surplus, which materialized in the last year as if from thin air, is still just a promise -- a hunch, even -- by a bunch of Washington politicians. And it could disappear just as quickly. "Things are happening which we call technical factors, which is another way of saying we don't have a clue, and they could just as readily go in the other direction," the chairman said. "And, if you start to simulate a number of these things that could go wrong, those surpluses evaporate fairly rapidly."
Greenspan, who looks like he enjoys answering politicians’ oafishly loaded questions about as much as he likes tipping his hand on interest rates, did throw his party fellows a few tidbits: Even a big tax cut, properly phased in, wouldn’t spark inflation. And it certainly would be preferable to frittering it away on new spending programs. But give Big Al his druthers, and he’d rather pay down the debt. It isn’t surprising that the Fed Chairman, whose speeches are the economic equivalent of Rorshach tests, left both sides with enough soundbites to claim his support. On his list of preferences, the tax cut ranks second. The Clinton plan certainly bears some characteristics of a spender’s plan –- that’s certainly what the Republicans say. But the voters, so far, seem to see it the other way.
Greenspan left the question open, like a warning, and laid down his picks and pans: Debt reduction, which would lower interest rates and free up investment capital -- good. New spending, which neither party trusts the other to lay off of -- bad. Saving for the future –- good. Putting all your eggs in one tax-cut basket and hoping for the best -– bad. All in all, Greenspan signed off on a rather conservative, rather Republican philosophy. It’s just that the Republican who’s getting all the credit for it is Bill Clinton.