Robert Reich, the former secretary of labor for Bill Clinton, has some interesting things to say about Alan Greenspan in a review of "The Age of Turbulence" (TLS 12/21 & 28, 2007). Greenspan, according to Reich, has a good side and a bad side. First the good side.
Greenspan's power and authority as chairman of the Federal Reserve system was the result of "his deep understanding" of how the economy works in reality "as opposed to how it works in theory." It takes a certain genius to actually let the "facts" speak for themselves, as it were, and not try to set up policies based on abstract theories.
Reich also says that the "boom" of the 1990s, credited to Clinton, was actually the work of Greenspan who rejected the economic models of the past because he recognized the potential of the newly developing high-tech economy. The good Greenspan was open minded and far seeing when it came to the actual workings of the US economy. He gets credit for this. Now for the bad Greenspan.
As a youth, Greenspan fell under the malign influence of the capitalist apologist Ayn Rand whose teachings dulled his humanity towards the suffering of those less fortunate than himself. He took away from Rand a belief in capitalism and the "market" for which there was no empirical evidence. He became a Republican and a Reagan supporter because he liked the kind of conservatism that Reaganites propagated which "implies much less government support for the downtrodden" [Reich is quoting from the book]. Tough love is good for them.
Under Reagan the "downtrodden" got it in the neck, the rich got tax cuts, the bloated military budget grew, and deficits bloomed. One reason for letting the deficit grow was to hamper social spending should a future Democratic administration come to power. When Clinton came to power, Greenspan told him it was a priority to shrink the now very large federal deficit. In his book Greenspan says, "Reagan had borrowed from Clinton, and Clinton was having to pay it back." This is practical Ayn Randism-- the rich take from the poor.
The Bush administration has done the same as the Reagan, but worse. Reich says, thanks to Greenspan, even if a Democrat is elected in 2008, despite all the talk about universal health plans and rebuilding America, the money won't be there and "inequality will continue to widen." If this is so, then the Democrats will get the blame, the newly enthused progressive majority will become disillusioned, and the stage will be set for Jeb. The two party system will clunk along.