ALAN GREENSPAN’S PLACE IN HISTORY….Paul

ALAN GREENSPAN’S PLACE IN HISTORY….Paul Krugman wonders what Alan Greenspan is going to say about the 2004 budget when he testifies before Congress next week:

Mr. Greenspan must know that many people, whatever they say in public, now regard him as a partisan hack. That very much includes Republicans, who assume that he will support anything Mr. Bush proposes. What he does next week will determine whether that perception sticks.

He has certainly run out of excuses. As a famous fiscal scold, he can’t adopt the administration’s “deficits, schmeficits” approach. And he can’t make the supply-side claim that tax cuts actually increase revenues, when just two years ago he argued for a tax cut to reduce the surplus.

If Mr. Greenspan nonetheless finds ways to rationalize Mr. Bush’s irresponsibility, or if he takes refuge in Delphic utterances that could mean anything or nothing, history will remember him as a man who urged hard choices on others, but refused to make hard choices himself.

This may be Alan Greenspan’s last chance to save his reputation ? and the country’s solvency.

Greenspan’s policy U-turns have indeed damaged his reputation. I wonder if in the end history will simply judge him as the person lucky enough to be the Fed chief during the boom of the 90s, not as a person who had anything to do with it.

And while this is controversial, I have long thought that he was wrong back in 1996-97 not to try to prick the stock market bubble. The Fed is supposed to control inflation, and in my view asset inflation is every bit as nasty as the normal kind. His “irrational exuberance” comments showed that he was well aware that stock prices were artificially inflated, but he did nothing about it. We are all paying the price now.