Former Fed chair Greenspan criticizes Bush in book 16 Sep 2007 04:42

2019-07-19 21:28
Former Fed chair Greenspan criticizes Bush in book 16 Sep 2007 04:42

By Mark Felsenthal

WASHINGTON, Sept 15 (Reuters) - Former Federal Reserve Chairman Alan Greenspan in a memoir to be released on Monday sharply criticizes President George W. Bush and congressional Republicans for abandoning fiscal discipline and for placing political priorities ahead of sound economics.

Greenspan says in his book, "The Age of Turbulence: Adventures in a New World," that he was surprised that Bush was unwilling to temper his campaign promises with fiscal reality once elected in 2000, as previous Republican administrations had done.

"I did not foresee how different the Bush White House would be," he writes. "Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he says. A copy of the book was made available by its publisher, The Penguin Press.

"Much to my disappointment, economic policymaking in the Bush administration remained firmly in the hands of White House staff," he adds.

Greenspan, now 81, was the second longest-serving U.S. central bank chairman in the institution's 93-year history when he stepped down in January 2006.

Praise has been heaped on the New York native and self-described "libertarian Republican" for overseeing the longest U.S. economic expansion on record.


SYNONYMOUS WITH THE FED

A jazz musician before turning to economics, Greenspan built his reputation as Fed chairman with his calm handling of the stock market crash of 1987, the 1997-1998 Asian and Russian financial crises, and the economic turbulence that followed the Sept. 11, 2001, attacks on the United States.

But he has also come under fire for policies that some say led to bubbles in technology and housing. His successor, Ben Bernanke, is coping with a prolonged housing downturn and credit-market turbulence.

Greenspan's long association with Republican administrations and his reputation for independence add clout to his criticism of the Bush administration and of other Republicans who led Congress until 2006.

Greenspan said in his book that Bush's combination of tax cuts and spending on the military and prescription drug benefits, while not "unrealistic" in 2000 after several years of federal budget surpluses, was no longer appropriate in the world of growing deficits that returned in 2002.

The former Fed chair said he urged Bush to veto a string of "budget busting" and "out-of-control" spending bills, but to no avail. He wrote that he was told the president preferred to avoid antagonizing Republican political leadership.

"To my mind, Bush's collaborate-don't-confront approach was a major mistake -- it cost the nation a check-and-balance mechanism essential to fiscal discipline," Greenspan said.

White House spokesman Tony Fratto said on Saturday the Bush administration conducted "rigorous" analysis and that the tax cuts ultimately accelerated the U.S. economic recovery after the 2001 recession.

"Because Congress worked with us, vetoes weren't necessary. We're not going to apologize for increased spending to protect our national security. That isn't just 'increased spending,' it's an investment in the safety and security of the nation," Fratto said.


MISJUDGED TAX CUT DEBATE

A consummate Washington political insider linked to former presidents Richard Nixon and Gerald Ford before becoming Fed chairman in 1987, Greenspan also has been criticized for endorsing Bush's proposed tax cuts in his testimony to Congress in January 2001.

Greenspan defended his comments at the time, which he said were balanced with a call for safeguards in case the fiscal situation deteriorated. In the memoir, he ruefully acknowledged he underestimated how his words would be selectively interpreted.

"While politics had not been my intent, I'd misjudged the emotions of the moment," he said.

Greenspan also addressed criticism that rock-bottom borrowing costs early in this decade fueled the housing bubble that has resulted in a burst of foreclosures among borrowers with blemished credit, saying the unusual risk of a downward spiral of prices was serious and needed to be dealth with.

"We wanted to shut down the possibility of corrosive deflation; we were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address ... It was a decision done right," he writes. ((Reporting by Mark Felsenthal, editing by Vicki Allen; Reuters Messaging: mark.felsenthal.reuters.com@reuters.net; email: mark.felsenthal@reuters.com; +1 202 898 8395)) Keywords: GREENSPAN/


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2019-07-19 21:28

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Subprime woes may keep Dutch budget in red -report 16 Sep 2007 21:13
Subprime woes may keep Dutch budget in red -report 16 Sep 2007 21:13

AMSTERDAM, Sept 16 (Reuters) - The U.S. subprime mortgage turmoil could cause a 2008 budget deficit of 0.5 percent of Dutch GDP, a TV news report said late on Saturday, citing a risk analysis of the 2008 budget plan it said it had obtained.

The subprime problem could result in a 4.5 percent decline in Dutch housing prices in 2008 and keep the budget in deficit, TV news programme RTL Nieuws said, citing the analysis.

Housing prices have a direct impact on the Dutch budget as they determine the level of some taxes paid by house owners.

A spokesman for the Dutch Finance Ministry said he did not know how RTL Nieuws obtained a copy of the budget plan, and declined to comment on its content.

The Dutch government will present next year's budget plan on Tuesday with a set of measures to put the budget back into surplus after an expected shortfall in government finances this year is expected to cause a 2007 deficit of 0.7 percent of GDP. In 2006, the Netherlands had a 0.6 percent budget surplus.

Defaults on U.S. home loans made to borrowers with poor credit records -- the subprime market -- have created a credit squeeze and triggered banking casualties on both sides of the Atlantic as loans were repackaged and sold on as asset-backed securities to investors across the world.

British mortgage lender Northern Rock <NRK.L> is the latest institutional casualty of the credit squeeze, requiring an emergency funding line from the Bank of England on Friday.

The Dutch Central Bank said earlier this month the impact of the subprime crisis for the Dutch mortgage market seemed limited and the Dutch macro-economic outlook remained positive, but calculations were difficult.

If there is not a significant impact, the Dutch budget is expected to show a surplus of 0.5 percent of gross domestic product (GDP) in 2008, rising in subsequent years to a 1 percent surplus in 2011, RTL Nieuws said, citing the budget plan.

Rising income from gas exports would be partly responsible for the 2008 budget surplus, RTL Nieuws said, adding that 2008 inflation would increase to 2 percent from 1.75 percent this year.

Taxes and charges to Dutch citizens and companies would rise by a total of 7 billion euros ($9.7 billion), the majority coming from higher income taxes, said RTL Nieuws, which has obtained copies of the annual budget plan in previous years.

Higher taxes in some areas, in combination with expected budget surpluses, were necessary to absorb the impact of an ageing population and invest in education, a climate policy, and safe neighbourhoods, RTL Nieuws said, citing the budget plan.

RTL Nieuws did not say anything about a possible rise in value added tax (VAT), which Dutch daily De Telegraaf reported last month would rise to 20 percent from 19 percent.

Tuesday's budget plan will be the first presented by the government of Christian Democrats and Labour formed in January. ((Reporting by Gilbert Kreijger, editing by Will Waterman; gilbert.kreijger@reuters.com; Reuters Messaging: gilbert.kreijger.reuters.com@reuters.net; +31 20 504 5007)) ($1=.7204 Euro)

Keywords: ECONOMY DUTCH BUDGET/SUBPRIME