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What Not to Expect From Chairman Greenspan
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11901 |
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CURRENT ISSUES
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| Issue
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8 / 1987 |
2,089 Words |
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John H. Fund
John H. Fund is an editorial writer for the Wall Street
Journal. |
How does Alan Greenspan do it? After months of speculation that Paul Volcker would be reappointed to a third term as the chairman of the Federal Reserve Board, President Reagan decided that he wanted his own man in the job. The only name that came up in White House discussions was Alan Greenspan, a shy, quiet, 61-year old economist who didn't even receive his doctorate until the age of 51. Yet Greenspan was clearly the only man who could fill Paul Volcker's shoes in the eyes of Wall Street analysts and international finance ministers.
Newsweek magazine credited Greenspan's aura of indispensability to his having "become the economists' equivalent of Henry Kissinger. Like Kissinger, he first achieved a reputation for analytic brilliance, then emerged into public view as an intimate presidential adviser and finally, out of power, became a media presence, our first celebrity economist." Greenspan's frequent appearances at society events, escorting glamorous women such as broadcaster Barbara Walters, also helped to win media and business attention.
But what really elevated Greenspan to the Fed chairman's job was the universal respect with which he was held in financial circles. Burton Malkiel, dean of the Yale School of Organization and Management, calls Greenspan "one of the most brilliant men I have ever met."
Greenspan's reputation for being a "pragmatic ideologue" also played a significant role in Reagan's decision. Chuck Kadlec of J.W. Seligman & Co. explains that "Greenspan is a conservative Republican, something Reagan wanted after having had Volcker, a Democrat, as Fed chairman for seven years. Greenspan, however, is clearly willing to compromise on issues, as demonstrated when he worked out a rescue plan for Social Security in 1983."
Greenspan's appointment is clearly a tempering of the fervor of the original Reagan revolution. Supply-side economists, who helped propel the 1981 tax cuts through a reluctant Congress, are split on whether Greenspan will be more an ally than a foe. Arthur Laffer, the originator of the famous "Laffer Curve," says that "Greenspan will be able to work with a lot of disparate groups to get supply-side growth and jobs in the economy."
On the other hand, Jude Wanniski, who helped popularize supply-side economics as an editorial writer for the Wall Street Journal, considers the appointment a mistake. "He is one of the nicest, sweetest, gentlest public figures I've known," he said. "But he has been
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