As the dust settles gently over the Greenspan speech the consensus seem to be that what he said amounts to pretty bad news for the Bush administration. Given his previous reputation for independence this should come as no surprise, but this will not make his views any more palatable for the man whose father still holds Greenspan responsible for his losing the 1992 election. As Brad Delong puts it: "Alan Greenspan says the expected the reasonable thing about the prospective return of the deficit and the long-run fiscal policy dilemmas of the American government. The truly surprising, the bizarre thing that I do not understand is why the Bush Administration PR flacks and their tame dogs in the press ever expected him to say anything else... "
When Democrats and liberal economists took potshots at President Bush's tax-cut proposal, everybody yawned. But when Federal Reserve Chairman Alan Greenspan joined the ranks of the critics, warning of wider budget deficits at a Senate hearing Tuesday, suddenly all Washington was in an uproar. Senate Democratic leader Tom Daschle of South Dakota called Greenspan's comments the kiss of death for the Bush plan, but White House spokesman Ari Fleischer said the news media had overplayed the Fed chief's objections. Veteran Fed watchers say Greenspan's stance is neither new nor surprising. Though he is a longtime Republican and shares the president's aversion to taxes, he has consistently railed against big deficits. And he has never bowed to any master in the White House. Tuesday's Senate testimony "is further evidence that he is a maddeningly independent chairman," Greenspan biographer Justin Martin said.
What's new in the latest incident is the public airing of his differences with the president. And the stakes are high, because the $695 billion tax cut plan (now officially revised up from the originally advertised $674 billion) is the centerpiece of Bush's domestic agenda. "I don't recall any case in which he has confronted an administration as openly as he has this time," said Lyle Gramley, a former Fed governor. Before going public, Greenspan voiced his doubts in a closed-door meeting with centrist senators from both parties several weeks ago. "He said the same thing publicly that he said to us privately," said Sen. Dianne Feinstein, D- Calif.