-Caveat Lector- from: http://washingtonpost.com/wp-dyn/articles/A52899-2000Nov9.html Click Here: <A HREF="http://washingtonpost.com/wp-dyn/articles/A52899-2000Nov9.html"> Unlikely Alliance Helped Build Economic Boom (w…</A> ----- Unlikely Alliance Helped Build Economic Boom Fed Chairman Alan Greenspan speaks as President Clinton looks on. (AP) Printer-Friendly Version By Bob Woodward Sunday, November 12, 2000; Page W08 Federal Reserve Chairman Alan Greenspan jumped at the invitation to visit the man who would be the next president. Arkansas Gov. Bill Clinton had just won the election in November 1992, and he wanted to reach out to the powerful Fed chairman. So a month after the election Greenspan was asked to come to Little Rock. Greenspan, 66, had been chairman of the Fed for five years. A lifelong Republican, he had first been appointed by President Reagan in 1987. President Bush had reappointed him in 1991, even though Greenspan had had a very uneasy and contentious relationship with Bush's economic advisers. The chairman was determined to establish a good relationship with the new president, though Clinton was a Democrat. With a somewhat severe face, bespectacled, a bit hunched, narrow-eyed and pensive, Greenspan radiated gloom. He spoke in a gravelly monotone, often cloaking his thoughts in indirect constructions reflecting the economist's "on the one hand, on the other hand." It was almost as if his words were scouting parties, sent out less to convey than to probe and explore. On December 3, Greenspan took a commercial flight to Little Rock to meet with Clinton. As they talked alone in the governor's mansion, Greenspan found himself quite taken with the new young leader. Clinton was totally focused, as if he had no other care in the world and unlimited time. They ranged over topics from foreign policy to education, and Greenspan saw that Clinton's reputation as a policy junkie was richly deserved. The president-elect seemed not only engaged but engrossed. Greenspan saw an opening to give an economics lesson. The short-term interest rates that the Fed controlled were at 3 percent, as low as they could practically go in these economic conditions, he said. But the Fed could keep them there. The 10-year and longer rates were an unusual 3 to 4 percentage points higher than the short-term rate, at about 7 percent. The gap between the short-term rate and the long-term rate, Greenspan lectured, was an inflation premium being paid for one simple reason: The lenders of long-term money expected the federal deficit to continue to grow and explode. They had good reason, given the double-digit inflation of the late 1970s and the expanding budget deficits under Reagan. They demanded the premium because of the expectation of new inflation. The dollars they had invested would, in the future, be worth less and less. Perhaps no single overall economic event could do more to help the economy, businesses and society as a whole than a drop in long-term interest rates, Greenspan said. The Fed didn't control them — the market did. But credible action to reduce the federal deficit would force long-term interest rates to drop, as the markets slowly moved away from the expectation of inflation, and could trigger a series of payoffs for the economy. Clinton was so sincere and attentive that Greenspan continued. He outlined a blueprint for economic recovery. Lower long-term rates would galvanize demand for new mortgages, refinancing at more favorable rates and more consumer loans. This would in turn result in increased consumer spending, which would expand the economy. As long-term rates dropped, investors would get less return on bonds and move into the stock market instead. The market would climb — an additional payoff. The federal deficit was so high and cumulatively unstable, Greenspan said, that increased government spending to increase jobs — in accordance with the traditional Keynesian model — no longer worked. The economic growth from deficit reduction could actually increase employment — a critical third payoff. Greenspan noted that the economy was rebounding from the brief recession of 1990-91, but there was no telling if it would last. As had happened in the past, the recovering economy could fall on its face. Getting the long rates down and keeping them down with a strong deficit-reduction program could sustain and increase economic growth even more than the conservative estimates that were circulating in the government or privately. This conversation continued for 2 1/2 hours. Greenspan had not intended to stay for lunch, but he did. From the beginning he sensed that Clinton was different from the four Republican presidents Greenspan had seen up close — Nixon, Ford, Reagan and Bush. The chairman left the meeting thinking, Either this guy has a lot of the same views as I do, or he is the cleverest chameleon I have ever run into. On the five-hour trip back to Washington, Greenspan tried to assess what he had observed. Clinton was what Greenspan termed an "intellectual pragmatist." The term also applied to Greenspan himself. Clinton's campaign promises included tax increases on the wealthy, a violation of Republican orthodoxy. But increasing taxes reduced the federal deficit — and those deficits, Greenspan thought, were such a threat to the future of the economy that it might just be worth it to support Clinton's proposal. One of the paradoxes, Greenspan realized, was that by running up the federal budget deficits, Reagan had effectively borrowed from the period that was now going to be the Clinton era. Clinton would have to pay it back by paying down the deficit in some way. The irony was that Clinton probably wouldn't have been elected if Reagan hadn't created the deficits. Reagan had given Bill Clinton the opportunity to win the presidency, but he had also bequeathed to the new president a major problem. Greenspan's real connection to the new administration was Lloyd Bentsen, the former Texas senator who was now Clinton's treasury secretary. They were close friends and regularly played tennis together. Though a partisan Democrat, Bentsen had been chairman of the powerful Senate Finance Committee and was conservative on fiscal and money matters. Bentsen arranged for Greenspan to see Clinton on Thursday, January 28, the eighth day of the new administration. Greenspan told the president that it would be dangerous not to confront the deficit very soon. The problem would not make itself immediately apparent during the next several years, because defense spending cuts would obscure the ballooning deficit. After 1996, though, the data projections showed that the deficit and interest on the federal debt would become explosive. "You cannot procrastinate indefinitely on this issue," Greenspan warned. Without action, he forecast "financial catastrophe." Clinton made clear that he had received the message. With Bentsen, Greenspan went further. He urged the new administration to set ambitious deficit-reduction targets for the federal budget. On February 5, the White House economic advisers sent Clinton a 15-page memo that summarized budget options and Greenspan's analysis. It read, in part: "Greenspan believes that a major deficit reduction (above $130 billion) will lead to interest rate changes more than offsetting" the contraction to the economy caused by less government spending. This meant long-term rates would come down if the deficit reduction was sufficient to have credibility in the financial markets. On his copy, Bentsen had written with his lead pencil referring to Greenspan, "He urges 140 or above," meaning Greenspan thought a $140 billion reduction in the economic plan four years out (1997) would be more credible than $130 billion. It revealed their most private, confidential talks. Bentsen urged the president to develop a personal relationship of trust with Greenspan. He also emphasized to Clinton the importance of deficit reduction as a catalyst for lower long-term interest rates. In a sense, Bentsen and Greenspan were using each other. For Bentsen, Greenspan's view on a specific deficit target was a potent weapon in the Clinton administration deliberations. For Greenspan, a big reduction in the federal deficit would make his job immensely easier, because lower deficits would likely mean lower actual inflation. Clinton adopted the $140 billion target for 1997. When the president unveiled his economic plan at his first State of the Union address to a joint session of Congress on February 17, 1993, Greenspan was there in the gallery, in seat A6 — right between Hillary Clinton and Tipper Gore, the vice president's wife, on full display as the national television cameras swung over to get reaction. The first lady had invited him to sit in her box for the speech, and Greenspan had accepted on the basis that protocol dictated he not refuse. As Clinton spoke, Greenspan applauded stiffly. He believed the White House had given him enormous power, because if he chose to criticize the Clinton economic plan, he could do substantial damage — even perhaps do it in. But the large deficit- reduction portion was in part his own design, and he was hardly going to shoot it down. On February 19, in testimony before the Senate Banking Committee, Greenspan said that the Clinton plan was "serious" and "credible," making headlines with his support. Greenspan thought that Clinton had broken the gridlock on dealing with the deficit. He couldn't say it publicly, but he believed the president had displayed an element of political courage. He was taking a stance that some in his own party would fight him on. In Greenspan's view, Clinton deserved commendation if there was any justice in the crazy town of Washington. It had been a remarkable four months for Greenspan. His impact on the new Democratic president was real and positive — a degree of influence he had not begun to approach during the more than five years he had been chairman under Reagan and Bush. Within a week, long-term interest rates began to fall, and Clinton said in a speech, "Just yesterday, due to increased confidence in the plan in the bond market, long-term interest rates fell to a 16-year low." The yield on the 30-year Treasury bond had dropped below 7 percent. Bentsen was delighted. He was all over Greenspan, peppering him with questions about the chairman's forecast and projections for the bond market. The long bond rate was the new talisman in the Clinton administration. On May 18, 1993, Greenspan and the Federal Reserve Open Market Committee, the key-interest-rate-setting body at the Fed, voted to "lean" toward higher interest rates and gave the chairman the authority to raise rates by himself before the next meeting. The vote — due to be made public six weeks after the meeting — indicated that interest rate hikes were likely coming because the economy was overheating and high growth was almost certain to trigger a new round of inflation. Six days later, the Wall Street Journal scooped everyone with a story reporting that "Federal Reserve officials voted to lean toward higher short-term interest rates." The New York Times wrote that the Clinton White House "would view such action as a declaration of war. And it would probably direct its heavy artillery at Mr. Greenspan." Greenspan wanted to avoid war between the Fed and the White House at almost any cost. He spoke with David Gergen, a longtime communications adviser to Republican presidents Nixon and Reagan who had just joined the Clinton White House staff in the same capacity. Greenspan had been friends with Gergen for years, part of his Washington network. Gergen urged the chairman to give Clinton a pep talk. Polls showed Clinton's approval rating at 36 percent, the lowest of any new president in his first four months. Greenspan needed to encourage Clinton to continue to push his deficit-reduction plan. On Wednesday, June 9, Greenspan went to the White House to see the president. The chairman was upbeat. The new consumer price index due out the next day was expected to show an increase of only 0.1 percent, suggesting inflation was in check, he said. They could feel some relief. The long-term economic outlook was the best and most balanced in 40 years, he told the president. He confirmed the authority his committee had given him to raise rates. "If I have to do something, it will be very mild," he assured Clinton. A small increase would signal to the markets that the Fed was on top of the situation, and it was likely that the long-term rates would come down. Several Democratic senators suggested publicly that Clinton drop his five-year deficit target. This was precisely the wrong message, Greenspan felt, and on July 20 he testified before the House Banking Committee with unusual directness, "If you appear to be backing off, I think the markets would react appropriately negatively." Clinton's hands were effectively tied. He stuck with his deficit-reduction plan, though Bentsen had to bat down an effort from populist advisers to trim it some more. In August, Clinton's deficit-reduction plan passed Congress by the narrowest possible margins, 218 to 216 in the House, and 51 to 50 in the Senate, with Vice President Gore breaking the tie. Not a single Republican had voted for the plan, which cut $500 billion from the deficit over the next four years by increasing taxes and cutting some federal spending. The only real Republican support had come from Alan Greenspan. For years there had been discussions in the media and elsewhere of the possibility that the Fed could execute a so-called soft landing. That meant the Fed would take preemptive action to increase interest rates months before actual inflation showed up. This could take the top off any coming boom, moderate and stabilize the economy and prevent inflation — and a recession. Greenspan followed the discussion of this theory scrupulously. There was no doubt that raising or lowering interest rates worked with a lag, having an impact on the economy as much as a year or more later. Greenspan thought there was persuasive evidence that the Fed needed to be ahead of the game. Rates would have to be increased in anticipation of actual inflation. But when? And by how much? Earlier efforts at a soft landing had failed, including the Fed's effort in 1988. Still, Greenspan was willing to give it a try. If the soft landing succeeded, he could see no downside for the economy. But if they failed, they might hamper or even strangle the economic recovery. Because it was untested and because it was not a concept rooted in economic theory, Greenspan recognized that it was very risky. To him, it was like saying, Let's jump out of this 60-story building and land on our feet. Some signs of a major expansion in the economy became apparent to Greenspan by early 1994. Lower interest rates had helped the banks make money and save themselves from collapse. Credit was easing and businesses could get loans. The system had been "liquefied," as he liked to say. High inflation could not be detected, but he suspected it was around the corner. He was almost sure. On January 21, 1994, Greenspan went to the White House to meet with President Clinton and his economic advisers to warn them that rate increases were likely. "We've got a dilemma, and you should understand," the chairman said. "We haven't made a decision, but the choices are, we sit and wait and then likely we'll have to raise short-term interest rates more. Or we could take some small increases now." "Obviously," the president said, "I want to keep interest rates low, but I understand what you may have to do." Bentsen saw that the president was reluctant. Clinton was swallowing about as hard as he could. "We've been flat so long," Greenspan said, referring to some 15 months of a 3 percent short-term interest rate. "We almost have to show that we can do something, that we're willing to move." "Wait a minute!" Vice President Gore interjected. "What about the possibility that you introduce uncertainty?" Historically, the Fed moved in a series of stair-step increases. Gore noted that in 1988-89 the Fed's short-term rate increases had gone from about 6.5 percent up to nearly 10 percent in a dozen small moves. With that expectation in the market, long-term rates could be driven back up. It was an interesting point, Greenspan said, but the long rates were high because of the inflation expectation, which the administration was addressing with its deficit-reduction plan. Even if long rates went up initially, he did not think they would stay up. Clinton and his advisers now had to face what potentially could be a profound change in their relations with Greenspan. Politics was often a matter of choosing sides. Which side was Greenspan on? For that matter, it was difficult to determine exactly which side Clinton was on. The president's economic policies were difficult to label. He tended to talk liberal, especially as he pushed for his wife's health care reform, which would extend universal health care insurance to more than 40 million Americans. But his actions so far had been a blend. The term Clinton liked was "New Democrat," meaning someone who was pro-business but also concerned with the middle class and the poor. But his policies also included the more visible deficit-reduction, bond ma rket, free-trade Eisenhower Republicanism that was more in tune with Greenspan than Clinton wanted to acknowledge. The blend was embodied in Robert E. Rubin, the former head of Goldman, Sachs & Co., the premier New York City investment banking firm, who was director of the White House National Economic Council, the administration's coordinator of economic policy. Rubin had built a strong relationship with Clinton, and he reinforced Greenspan's and Bentsen's arguments that the first order of economic business had to be deficit reduction. Now, with interest rate hikes coming, Rubin urged Clinton to hold off on any public criticism of the Fed. Criticism simply would not be effective. The Fed considered itself almost religiously independent, and any effort to influence it would be counterproductive. Bentsen argued in turn to the president that it was better for the Fed to move now, in 1994. Given the one-year lag in the impact, any economic slowdown would occur in 1995, with a pickup in 1996. If the Fed waited and raised rates in 1995, the slowdown would be in . . . Before Bentsen could get "1996" out of his mouth, the president had grasped the point. Greenspan himself was certain that if they did not raise rates, history and experience dictated that at some point in 1995-96 there would be a recession. That Clinton would be running for reelection in 1996 obviously made it easier for Greenspan to sell an attempted soft landing. He would be taking economic growth from 1994 — lopping off the top of an expected boom of excessive growth — and saving it for 1995 and 1996. That is, if it worked. Making it work had a lot to do with timing, which in turn had to do with economic forecasting, an imprecise science that did not approach the mathematical certainty Greenspan loved. There was no alternative to forecasting. It wasn't guessing or fortune-telling, but the forecasters, including himself, were going to be wrong some of the time. On February 4, 1994, the Fed's key interest-rate-setting committee voted to raise rates by a quarter percent. It was the first rate increase in five years, and for the first time in history the Fed publicly announced the increase. That day, the Dow Jones industrial average dropped nearly 100 points, to 3871, the largest single-day loss in two years. Over the next four months, the Fed raised rates another full 1 percent. At the White House, the president was increasingly restless. Was this necessary? Was Greenspan going too far? Did he know what he was doing? Rubin and Bentsen insisted everything was okay. Clinton grew angrier and angrier. When he blew up about rising interest rates, as he frequently did, the members of his economic team let him blow off steam and then urged him to continue to confine his distress to the privacy of the Oval Office. Any reasonable Fed was going to have to pull the foot off the accelerator, they told him. The low short-term interest rate, the so-called fed funds rate, had been pumping up the economy, so interest rates were going to have to go up to cool things off. All the economic models built on years of history showed there was a limit to how high growth could go without triggering inflation. To complicate matters, the economists believed — and recent American economic history showed — that there was a level of so-called full employment. If unemployment dipped much below 6 percent, the pressure for wage increases would trigger inflation. The president was skeptical and even outraged. So the problems were too much economic growth and too many people working! It was ridiculous, he seethed. Once, when Greenspan had an appointment to see the president, Clinton and his economic team were assembled in the Oval Office. As they waited for Greenspan to arrive, the president had launched into a comedic imitation of the chairman. Speaking in a gloomy, deep voice, he mimicked Greenspan drumming on inflation. Inflation! Inflation was all-important. Inflation was the center of the universe. Inflation! Inflation! It was a pretty good caricature, and his advisers were in stitches. One checked nervously to make sure the soundproof Oval Office doors were shut tight so the chairman wouldn't hear. Now there were no jokes coming out of the Oval Office about Greenspan. Worse, the bond market had gone to hell. The long-term rates were shooting up, nullifying the gains from the 1993 deficit-reduction plan. Where was the payoff? the president wanted to know. The Fed continued to raise rates into February 1995, taking the Fed's key interest rate from 3 percent up to 6 percent in less than a year. By the summer of 1995, the economy showed clear signs of slowing. Growth was hovering at an anemic 2 percent. On Sunday, June 11, White House Chief of Staff Leon Panetta was on "Meet the Press" and was asked if the Fed should reduce interest rates. "Well," Panetta said, "it would be nice to get whatever kind of cooperation we can get to get this economy going." Asked if he was jawboning the Fed to get rates lower, Panetta replied with his overeager grin, "Is that what it's called?" Bob Rubin, who had moved from the White House to become treasury secretary in early 1995, was furious. The administration had been so disciplined, avoiding any public or even private effort to pressure Greenspan. The soft landing would occur because the administration and Greenspan didn't let the economy get out of control. It wasn't science, Rubin knew, but he believed Greenspan was making a series of highly informed judgments — the best they had. White House pressure to cut rates could actually prevent a rate cut. Rubin immediately went public with a rebuke for Panetta and an assurance, almost an apology, to Greenspan. Of Panetta, Rubin said in a public statement, "I can assure you that his comments were not intended to signal any shift. Our policy with regard to the Federal Reserve has been consistent from the beginning of the Administration — and that is not to comment." President Clinton seemed to agree with Rubin. It appeared that Panetta was briefly put in the doghouse — an unusual place for the White House chief of staff, who was supposed to be managing the executive branch on behalf of the president. Rubin and others knew that a side of Clinton agreed with Panetta, but in terms of politics and public perception, Clinton's relationship with Greenspan and the Fed were more important than his relationship with his chief of staff. Greenspan took Panetta's comments as a cheap and ineffective hit. Rubin had it right, not because of their growing friendship but because Rubin saw it was in the president's self-interest to avoid political meddling with the Fed. What was interesting, Greenspan realized, was that his relations with the administration were so good that the White House was more concerned about the perception of Panetta's comments than Greenspan was himself. Now Greenspan had a chance to practice some of his fine-tuning. Having doubled short-term interest rates from 3 to 6 percent during 1994 and early 1995, he realized that he might have slightly overshot. To bring the economy in for the soft landing now required a slight easing. On Thursday, July 6, 1995, Greenspan proposed a rate cut of a quarter percent. It was the first decrease in nearly three years and the first rate cut during the Clinton administration. The chairman had been telling himself that he should not expect reappointment to another four-year term. After all, he had been appointed to the job twice by Republican presidents — Reagan in 1987 and Bush in 1991. A Democratic president would want to choose his own chairman. If Greenspan were president, he would want to choose his own person. It wasn't plausible that Greenspan was going to get another chance. By November 1995, no one at the White House had brought up his reappointment in their frequent conversations with him. And, of course, Greenspan had not brought it up. His term was due to expire in five months. In the meantime, as he had from the start, the chairman worked the Washington network — parties, private lunches and dinners, tennis matches, a steady stream of private, off-the-record gossip, chat and court intrigue. When the subject of his future came up, Greenspan would adopt a stance of studied nonchalance. He would have had eight good years. If Clinton reappointed him, he would accept. If not, that, too, would be okay. He worked at showing neither anxiety nor pain. He wanted that to be clear. He shrugged. He smiled. But the message was clear: He was available. By the end of 1995, Greenspan had the economy right where he wanted it. Inflation was low, at less than 3 percent for the year. Unemployment was also low, steady in the 5 1/2-percent range, with the addition of 1.8 million jobs for the year. After 3 1/2-percent growth the previous year, the annual growth was down in the range of 1 1/2 percent. There had been no recession. Greenspan had delivered. The economic analysis he had given Clinton in December 1992 was turning out to be correct. The payoffs he had anticipated were evident. By keeping inflation low and cutting the federal deficit, the intermediate- and long-term interest rates — the key rates for businesses, home buyers and consumers — were 2 to 21/2 percent below their levels at the beginning of 1995. Bond prices, which move the opposite direction as interest rates, were up substantially, and the stock market was up about 35 percent with the Dow at 5117 — its best year in two decades. He was available. Rubin never considered it a real question. Reappointing Greenspan was a no-brainer. Rubin and Greenspan both attended a weekend meeting of the Group of Seven major economic powers in Paris in January 1996, and the two had a chance to speak privately. Taking advantage of a quiet moment, they walked together toward a series of large plate glass windows at one end of the room, with a view of Paris before them. The two men had established a feeling of trust. For Greenspan, such friendship, closeness and agreement gave him a sense that they were working for the same firm. Greenspan had once remarked privately, and only half-jokingly, that he considered Rubin the best Republican treasury secretary ever, though he was a Democrat. "When you get back," Rubin said, "the president's going to want to talk to you." Greenspan could tell by the body language that it was all favorable. "The president's quite pleased with what you've been doing," Rubin said. The implausible had become plausible. Greenspan realized it was the soft landing that made his reappointment possible. He knew he had helped hand Clinton what the chairman called "a pro-incumbent type economy." Most important, there had been no recession. Clinton understood the power of the economy in a presidential election. The 1990-91 recession — and the economic doldrums and pessimism of 1992 — had been the foundation of his first presidential campaign. The campaign's memorable slogan, "It's the Economy, Stupid," devised by political strategist James Carville, contained a pledge that Clinton would be engaged and in touch with the forces that affected people's daily lives. The last three presidents to lose-Ford, Carter and Bush-had failed in part because they had been perceived to have mismanaged the economy. On February 22, 1996, Clinton announced that he was reappointing Greenspan to a third term. "He brings his years of experience as a prominent economist," Clinton said, "and, I might add, a leading Republican." Clinton went on to win reelection, partly due to the sound economy. For the next two years, Greenspan resisted sustained pressure from within and outside the Fed to raise rates, increasing them only once, in March 1997, and only by a quarter percent. On Tuesday, May 5, 1998, Greenspan went to the Oval Office to see the president. It was the fourth month of Whitewater independent counsel Kenneth Starr's investigation of Clinton's relationship with former White House intern Monica Lewinsky. There was a sense that investigators were closing in. Greenspan had not visited the president formally for 16 months, and Clinton's economic team wanted Clinton to bask a little in the positive domestic economic news. In any case, an hour with Greenspan was always educational and worthwhile, and on this occasion it would be a momentary diversion from the president's mounting personal and legal troubles. "This is the best economy I've ever seen in 50 years of studying it every day," Greenspan told Clinton. There had been a boom in productive capital. Money that businesses were spending was yielding an extraordinary return because of increased worker productivity. The computer and high technology investments were paying off. And those payoffs had to be real, because the higher profits and economic growth had continued for several years now. Greenspan said that the stock market was very high by historical standards, but it could stay high. Despite his statements about "irrational exuberance" 18 months earlier, the chairman said, it was basically an illusion to think that the Fed could tinker with the stock market. In June 1999 Greenspan passed word to Rubin that a rate increase would soon be necessary because the economy was overheating. Rubin had no real problem. The president was not as confident. Did this have to happen? Clinton asked his economic team. I don't see any signs of inflation, he added, asking the same questions he had posed in 1994 when Greenspan was raising rates. Was this another preemptive stranglehold on the economy? he asked, echoing some liberal Democratic senators who had been his most vocal defenders during his impeachment trial, in which he had been acquitted. The president's advisers defended Greenspan's decision. Mr. President, said National Economic Council Director Gene Sperling, he is just putting his foot on the brake a little. This is good. It will keep the expansion going longer. The risk of inflation with unemployment at 4.2 percent was too great. Frankly, the president's advisers explained, Greenspan was on the softer side of the Fed's key interest rate committee, a little to the left even of the people that the president had appointed. Clinton's private objections were muted, not as intense or as deep as they had been in 1994. "I bet he'll stay there until they carry him out," President Clinton joked to his economic advisers at the end of 1999, as they discussed a fourth term for Greenspan. Larry Summers, who had taken over as treasury secretary from Rubin that summer, recommended reappointing the Fed chairman. He and Sperling had already sounded Rubin out as a courtesy, to see if he wanted the Fed job. But Rubin had declined, saying, "Alan's perfect for this." White House Chief of Staff John Podesta got permission from Clinton to call Greenspan and offer the reappointment on behalf of the president. Greenspan accepted. At 73, the chairman found that his mind still functioned well. He figured he would know he was losing it when he started to have difficulty with mathematical relationships, and he was aware of no diminution of that mental capacity. He was fully engaged. His only problem was that occasionally he couldn't remember people's names. The White House set early January 2000 for the announcement, wanting to make the timing a surprise before Congress returned from recess. That way, Clinton could give his annual State of the Union address later in January and fully embrace the good economy and Greenspan, leaving no doubt about the chairman's future role. In February, the American economy would officially have enjoyed the longest economic expansion in its history. The White House wanted the Clinton-Greenspan team to be part of the celebration. Greenspan arrived at the executive mansion on January 4. Clinton, Summers, Sperling and Council of Economic Advisers Chairman Martin N. Baily gathered around the dining room table next to the Oval Office with Greenspan. Podesta sat in a chair off to the side. Clinton and Greenspan were almost glowing at each other, odd partners sitting there around the polished wood table, linked surprisingly to each other's greatest successes, wrapping themselves in each other's legacy. "You know," the president said, addressing Greenspan to his immediate left, "I have to congratulate you. You've done a great job in a period when there was no rule book to look to." "Mr. President," Greenspan replied, "I couldn't have done it without what you did on deficit reduction. If you had not turned the fiscal situation around, we couldn't have had the kind of monetary policy we've had." "After doing so well," Clinton said, "no one would blame you for wanting to go out now on top." "Oh, no," Greenspan said, "this is the greatest job in the world. It's like eating peanuts. You keep doing it, keep doing it, and you never get tired." Clinton folded his arms, tightened his body over his crossed legs and glanced over as if to say, I know what you mean. He seemed wistful. The irony was palpable. Greenspan, at 73, had already served 12 years and would get to be chairman for another four years. Clinton, 53, had served seven years as president, and had only another year. The Constitution barred him from seeking a third term. The younger man would have to leave office and re-create himself, while the man 20 years older would go on. Who would have thought, seven years before at their first meeting in Little Rock, that such economic conditions were even possible — steady growth, low inflation, unemployment hovering at an unheard-of 4 percent and the Dow above 11,000. More than 20 million new jobs had been created since Clinton took office. Some economists would have put the odds of that at 1 in a million. Greenspan, ever a stickler about probability, couldn't even calculate it. Of all the important people in Clinton's life, nearly all — including himself — had let him down, or not lived up to their full promise. Hillary had failed to deliver on health care, although she had stood by him during the Lewinsky scandal. Vice President Gore, though loyal, had not yet emerged as a vibrant successor. Dick Morris, the chief political strategist for the successful 1996 reelection campaign, had been forced out in a scandal and then turned on Clinton and written an informative-but-tattletale book. George Stephanopoulos, Clinton's young and trusted adviser, had also written a book full of inside stories of anguished decision-making and private fury. Democratic leaders in the Senate and House had come and gone. Staff had come and gone. Rubin, the shinning light of the Cabinet, was gone. Clinton's vaunted campaign fundraisers had brought scandal and doubt on the presidency. Clinton himself had not lived up to his own grand governing vision. Greenspan alone had stood and improved his ground. In the Oval Office, Clinton announced Greenspan's reappointment to a fourth term. He would serve as Fed chairman until 2004. The two men showered each other with praise. Clinton said Greenspan's willingness to stay in the job s hould be "a cause of celebration in this country and around the world." Greenspan, in turn, gave Clinton the highest endorsement a Republican Fed chairman could offer a Democratic president. "And I must say you have been a good friend to America's central bank. Thank you, sir." © 2000 The Washington Post Company ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, All My Relations. Omnia Bona Bonis, Adieu, Adios, Aloha. Amen. Roads End <A HREF="http://www.ctrl.org/">www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! 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