krugman has a shot at greenspan

With those words, delivered in Senate testimony on Jan. 25, 2001, Alan Greenspan -- revered during the 1990's as the nonpartisan architect of America's prosperity -- inserted himself decisively into politics, on the side of George W. Bush. The chairman of the Federal Reserve didn't specifically endorse Bush's plans, but his words were exactly what Bush needed. Before Greenspan's testimony, many political observers questioned whether the victor in a disputed election could get an enormous, controversial tax cut through Congress. After Greenspan spoke, much of the resistance collapsed.
http://www.nytimes.com/2004/06/06/magazine/06GREENSPAN.html?ei=1&en=ed53da65be977088&ex=1087559008&pagewanted=all&position=

Yet in retrospect we know that Greenspan's ''judgment'' -- that tax cuts were needed to prevent excessive budget surpluses -- was a misjudgment of Rumsfeldian proportions.

Yet his reputation is not what it once was. At the height of the boom, he was the monetary maestro whose advice was sought on many aspects of economic policy. Now his record as a monetary leader has been called into question, and his judgment on fiscal policy has been proved disastrously wrong. Worse, he seems to have abandoned the long tradition that places the Fed above the political fray.

Why did he do it? There are two possible interpretations. The more generous one is that he never gave up the ideals of his younger days. Into his 40's, Greenspan was an acolyte of Ayn Rand, the libertarian novelist and philosopher, and Greenspan has never repudiated his Randian association. Nonetheless, during the Clinton years he came to be viewed as a moderate. Maybe that was a mask, and all those years he was just waiting for an opportunity to use the prestige of his office to undermine the hated institutions of the welfare state.

The less generous interpretation is that Greenspan simply abused his position to help his friends. Kenneth Thomas, a finance professor at the Wharton School, has calculated that Greenspan visits the White House about once a week, as The Christian Science Monitor reported last month, and that is almost four times as often as he did when Clinton was president.

Part of the genius of George Bush's political operatives is their ability to persuade people (Colin Powell, Tony Blair) to betray their principles, to say and do things they will later regret, in support of a presumed shared cause. Paul O'Neill, Bush's first treasury secretary, falls into the same category: he was a moderate Republican who for a time played good soldier, defending the Bush tax cuts despite private qualms, to help the new president -- a man he thought shared his values -- by giving him an early political victory. And guess what: O'Neill was a close friend of Greenspan's.

Either way, Greenspan did something remarkable. After becoming a symbol of America's economic turnaround in the 90's, and anointing himself the nation's high priest of fiscal probity, he lent crucial aid and comfort to the most fiscally irresponsible administration in history. In the end, that will be his most important legacy.