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Greenspan is more interested in how the budget is cut than in how much it is cut by, although the more the better. The important thing, he says, is a perception by the American people that the Administration and Congress are working vigorously on a credible anti-inflation policy. He questions the orthodox view that unemployment will rise as spending goes down. Indeed, he asserts, unemployment ultimately would fall if inflationary expectations were reduced, because consumers would feel confident enough to spend more. Says he: "Short-term policies create an illusion, and then we find that's all it is —an illusion."
For the longer term, Greenspan favors thorough review of the budget-making process itself, with an eye toward re-examining such historic "un-controllables" as Social Security and veterans' benefits that he says go to permanent and ever-expanding "fiscal constituencies." He suspects that the administration of federal programs has generated huge cost overruns that would have made lawmakers, had they foreseen them, think twice about voting affirmatively. Greenspan's question: "Are the programs really mandated by law? We should look into that."
Greenspan's early background hardly pointed to a career in economics. The only child of parents who were later divorced, he was graduated from Manhattan's George Washington High School, where Henry Kissinger was a fellow student. Greenspan studied clarinet at the Juilliard School, and during World War II joined a dance band (Leonard Garment, now counsel to the President, played the sax). After a year of one-and two-night stands, Greenspan decided that he would prefer to go to college. In 1948 he was graduated summa cum laude in economics from New York University. He worked for The Conference Board (a business research group) for a while, then founded his now-thriving consulting firm in 1953 with William Townsend, a Wall Street bond trader, who died in 1958. Presently a bachelor, Greenspan was married for one year before a divorce.
Major Crossroad. He argues with cool passion that a free market functioning on its own without Government intervention is the most efficient and equitable way to allocate goods and services. But he likes to sound out economists who disagree, and he is likely to consult regularly with many of them and run a fairly open CEA. Over the years, Greenspan's ideas have been pragmatically tempered. He does not, for example, think that an immediate return to the gold standard is feasible, as he once did, although he says that the issue is "arguable."
His basic views have been greatly influenced by his friend and mentor, the Russian-born novelist and theorizer Ayn Rand (The Fountainhead, Atlas Shrugged), whom he has known since 1952. "America's abundance," she has written, "was not created by public sacrifices to the common good, but by the productive genius of free men who pursued their own personal interests." Of Greenspan's new job, Rand, 69, said last week: "I think it's an heroic undertaking."