Discarding Alan Greenspan

The Delphic Oracle returns to testify before the Senate and complains that Democatic Senators are using his previous testimony, in 2001, in which he said that he favored Bush's tax cuts as a means to lower the budget surplus, to unfairly discredit him. They are, he says, "discarding" the second part of his advice, in which tax cuts should have a "trigger mechanism" to avoid deficit spending.

"I think its frankly unfair" for critics to blame him for the fact that Congress chose to "read half my testimony and discard the rest," Greenspan said, venting his frustration on the issue publicly for the first time, in response to a question from Sen. Paul Sarbanes (D-Md.).

Sarbanes chided the Fed chief that he is well aware of how Congress works, and he should have known lawmakers might not heed all his cautions.

"I plead guilty to that," Greenspan said. "I did not intend it that way."

Plead guilty he should. At the time of his testimony on the tax cuts, he had a chance to tell Congress in no uncertain terms that any budget surplus should be used to shore up Medicare and Social Security. Instead he threw his full-throated support behind Bush's disastrous tax cuts, which Republicans now want to make permanent. And note: "permanent" also means no "trigger mechanism, Mr. Greenspan.

The Ayn Rand devotee used his "trigger mechanism" nonsense as an umbrella. He surely knew, as Sarbines said, that the Republicans were going to take the permission slip he'd just given them and run with it like kids with a pair of scissors. And now he's unfurled that umbrella to cover himself against the economic storm of stagflation that he has helped create. It won't work. The "Maestro's" carefully coifed image as a deft manipulator of the economic harp strings isn't going to survive him when the aging crank is finally wheeled out of the Fed. His use of the blunt instrument of rate cuts and hikes no longer works -- if it ever really did during our collective turn o' the century boomtown national grabfest. And his soothing, mysterious words that once swayed the markets are going to be soon unveiled as prattling bullshit to cover the fact that he really didn't have any idea what was going on with the U.S. economy.

Bush I and Clinton learned pretty quickly that Greenspan's real power was not in moving rates a half a point in either direction. Rather it was the threat of moving those rates as a way to force, particularly Clinton, to hew to Greenspan's line of fiscal discipline. When he went on Capitol Hill on that fateful day in 2001 and said "Let the good times roll" to the Republican Senate he voided his threat card. With Greenspan in their well greased pocket, Bush/Cheney had then cleared the last hurdle they faced in their plan to reward their donors, invite the Republican congress to the feeding trough, and bust the federal budget.

Bravo, Meistro. Bravo.