Greenspan leaves behind giant shoes to fill
Public service in Washington, D.C., is proving to be quite a perilous proposition. In the past two weeks, we have learned of House Majority Leader Tom Delay’s indictment, I. Lewis “Scooter” Libby’s indictment, Harriet Miers’ vilification and subsequent withdrawal as nominee to the Supreme Court and Karl Rove’s frequent trips not to lunch, but to testify in front of a grand jury.
What, then, of a public servant who has spent 18 years as chairman of the Federal Reserve? To put his tenure into perspective, Alan Greenspan has been at the pinnacle of monetary policy as long as most college students have been alive. Often referred to as “The Maestro,” his resume includes guiding the economy through the 1986 stock market crash, weathering two mild recessions and managing to keep the average inflation rate at three percent.
It is this final accomplishment that causes me to envision Alan Greenspan, hunkered down with piles of data, proclaiming in Yoda-like lingo, “Control inflation we must!” While not a proponent of inflation targeting, Greenspan has recently advocated increases in short-term interest rates to promote stable prices, a primary responsibility of the Federal Reserve.
Other than controlling inflation, why should we care about the Federal Reserve? After graduation, presumably, we will exit the friendly confines of campus to enter the job market. And the goals of the Federal Reserve are honestly little different than our own. In addition to controlling inflation, the Fed’s goals of maximum employment and economic growth are things we should all be hoping for.
Sure, there will be criticisms of Alan Greenspan both before and after his tenure ends at the end of January. It is impossible to keep all your friends in 18 years of Fed-speak and quite easy to take potshots from the periphery. Greenspan only held the cards for a small portion of the aggregate economy. Out of control Congressional spending, a “frothy” housing market (as Greenspan likes to call it), and increases in foreign ownership of American debt are just a few of the challenges that await his successor.
Didn’t hear about the nomination of Ben Bernanke to replace Greenspan last week? That isn’t a surprise. While conservative pundits were sticking pins into their Harriet Miers voodoo doll, President George W. Bush nominated someone who was without the baggage of his Supreme Court nominee. As a New York money manager commented in USA Today, “I view Bernanke as the anti-Harriet-Miers.”
Ben Bernanke certainly has the qualifications for the job. In addition to being on almost everyone’s short list to replace Greenspan, his resume is stellar. He has a Ph.D. from MIT, has chaired the Princeton University economics department and most recently has spent time as chairman of the Council of Economic Advisers. These are only the highlights. It’s tough to start a smear campaign on this nominee.
That is not to say that financial markets won’t experience some jitters. Let’s face it: Some people could probably have made full-time employment of translating Greenspan’s ambiguous comments for understanding by the common man. But he has been tried and is a constant for investors and the rest of the country alike. The status quo is an important force to be reckoned with not only in economics but also in the politics of the Beltway.
All this extolling of Bernanke’s virtues cannot cover up the fact that he will have huge shoes to fill. Greenspan is an icon to many, including a former vice-chairman of the Fed who stated that, “(Greenspan) has a legitimate claim to being the greatest central banker who ever lived.” While history will decide Greenspan’s contribution during his tenure, Bernanke must now lead monetary policy through some distinct challenges.
We can only hope Bernanke is up to the challenge to do his part in providing a sustained economic climate where college graduates are able to attain jobs, houses and a decent retirement plan. It wouldn’t be that bad if he would be able to attain his goal that Fed governors “signal their commitment to public service by wearing Hawaiian shirts and Bermuda shorts,” rather than stiff-looking suits.
Aaron Hill is a senior majoring in economics.