The first President Bush blamed Alan Greenspan
for contributing to his 1992 defeat by failing to cut interest
rates quickly enough to spur the economy. The second Bush in the
White House is seeing his hand strengthened by the same Federal
Reserve chairman's aggressive rate cuts and unexpected support for
The slumping economy has accelerated a Bush-Greenspan courtship
and put them into an unusual alliance.
The Fed's half-point cut in a key short-term rate on Wednesday
its second such reduction in a month should make it easier for
Bush to press his case on Capitol Hill for an accompanying tax cut.
But Bush, who enthusiastically endorsed the Fed's surprise
half-point cut on Jan. 3, was silent. Not because he did not
appreciate the move but out of what aides said was a respectful
nod to the Fed's independence.
The Fed move comes less than a week after Greenspan, in a
remarkable turnabout, sent a major valentine to Bush, telling a
Senate committee he now believes that a deep tax cut would help
stimulate an economy posting "close to zero growth."
In the past, he spurned Bush's proposed $1.6 trillion, 10-year
tax cut plan, suggesting the surplus should be used to pay down the
national debt instead.
The warming Bush-Greenspan relationship comes against the
backdrop of a worsening economy. A consumer confidence index
released on Tuesday plunged to its lowest level since 1996.
Also, more and more companies have reported disappointing
growth, closing plants and idling tens of thousands of workers.
Rolling blackouts and growing debt by utilities are roiling
California's once-vibrant economy.
The Fed's back-to-back interest rate cuts underscore the
seriousness with which Greenspan takes the economic slowdown.
A Republican economist, Greenspan was first picked for the Fed
job by President Reagan in 1987 and given a further four-year term
as chairman in 1992 by the elder Bush.
He later expressed regret. "I reappointed him and he
disappointed me," the elder Bush said in 1998.
Greenspan was reappointed by President Clinton in 1996 and again
During last year's presidential campaign, the younger Bush was
noncommittal on whether he would reappoint the widely respected
Greenspan if elected a marked contrast to GOP rival Sen. John
McCain's hearty endorsement.
"I would not only reappoint Mr. Greenspan if Mr. Greenspan
should happen to die, God forbid ... I'd prop him up and put a pair
of dark glasses on him and keep him as long as we could," McCain
said at one GOP debate.
But since winning the election, Bush has actively courted
His team gave Greenspan an early heads-up that Bush would
nominate Paul O'Neill the former head of Alcoa Aluminum and a
longtime friend of Greenspan as treasury secretary.
Bush's chief economic adviser, Lawrence Lindsey, served on the
Fed under Greenspan.
Bush also intends to tap another Greenspan associate, Stanford
University economist John Taylor, as chairman of the White House
Council of Economic Advisers, aides said. Taylor and Greenspan
worked together in the White House in 1976, when Greenspan was
President Gerald Ford's top economic adviser.
Bush may also bow to a Greenspan wish and extend the term of Fed
Vice Chairman Roger Ferguson, a close Greenspan ally, aides said.
Sometime Bush's courting of Greenspan has been on the exuberant
When the two met in December, Bush clapped a hand on Greenspan's
shoulder and told reporters he was "a good man." The shy
Greenspan appeared to recoil from the unexpected contact.
Bush was lavish in praising Greenspan's first half-point cut in
interest rates on Jan. 3, reversing the silence-is-golden policy
Clinton had followed. It was apparently not appreciated by
Greenspan. Presidential utterances on Fed moves can have unintended
effects on financial markets.
"Mr. Greenspan needs to make his decisions independent of what
I think. I learned a pretty good lesson during the transition,"
Bush said on Tuesday. "That's the last time I'm going to comment
about the actions that Mr. Greenspan takes."
And true to that promise, neither the White House nor the
Treasury Department commented on Wednesday's Fed move.
Greenspan's detractors and there are relatively few suggest
the nation's top banker is too sensitive to political
considerations, going out of his way to try to please both Clinton
and Bush. "He wants to be a player in the broader context," said
Sen. Byron Dorgan, D-N.D.
Dorgan contends that the Greenspan Fed erred in waiting too long
to act on interest rate cuts. "This economic slowdown is not an
accident," he said. "The Federal Reserve Board increased interest
rates six times since June 1999."
It's a sentiment that the older Bush might endorse but not the
EDITOR'S NOTE: Tom Raum has covered Washington for The
Associated Press since 1973.