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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: gnuman who wrote (71266)	12/2/1999 10:45:00 AM
From: Les H	Respond to of 132070

Slowed economy is Greenspan's ace in hole December 2, 1999 BY ROBERT NOVAK SUN-TIMES COLUMNIST From the mysterious inner recesses of the Federal Reserve Board comes credible word that Alan Greenspan has changed sides. Does President Clinton's failure to clearly signal a fourth term for the Fed chairman mean Greenspan will apply the brakes to the economy? Nobody is suggesting that Greenspan would let personal pique guide his much-applauded direction of monetary policy. Nevertheless, friends of the chairman (including some former colleagues on the Fed) see the president's silence on Greenspan's future as inescapably influencing this outcome: The chairman will move for more tightening next year at the increasingly divided central bank. In the euphoria of 1999, nobody worries as much about the long-range impact of tighter money. Indeed, there was hardly a political peep when the Fed implausibly raised interest rates again Nov. 16 in the absence of inflation and the presence of excellent productivity figures. But the long-range impact of continued obsession with inflation could retard the economy well into the future. The Fed is intentionally the least democratic entity in the world's greatest democracy. Accordingly, what is afoot on Constitution Avenue has to be doped out by examining scattered pieces of evidence, which are themselves shrouded. Clue No. 1: Shortly before the Nov. 16 tightening, a Fed governor known as a relentless anti-inflation hawk put out this word: Nobody should think that we shall be precluded from additional interest rate increases in 2000 simply because it is an election year. In other words, there is more tightening ahead. Clue No. 2: After the Fed's Nov. 16 tightening, an insider at the central bank let it be known that Greenspan was no longer among the "pragmatists" who resist a pre-emptive war against inflation; he has now joined the "ideologues." That would connote more interest hikes ahead. Clue No. 3: According to impeccable sources, former Treasury Secretary Robert Rubin's arrangement with Citigroup does not include line responsibility or a future path to become the financial giant's CEO. That leaves the door open for Rubin to succeed Greenspan as Fed chairman. Greenspan, at age 73, is not ready for retirement, and Clinton has had nothing but praise for the celebrated central banker. Furthermore, Treasury Secretary Lawrence Summers privately has assured the financial community that Greenspan definitely will be reappointed. But the absence of an announcement may betray the desires of Vice President Al Gore, a very partisan Democrat, to name his own Fed chairman as president. Even if he is not reappointed, Greenspan (whose term as a Fed governor continues until 2006) would stay as chairman after his third four-year term ends in June 2000. A President Gore in 2001 could pick liberal Democrat Rubin to replace conservative Republican Greenspan. Pondering this political situation, Greenspan understandably would be less interested in fighting off the "ideologues" and supporting the growing economy desired by the president. The Clinton-appointed Fed governors--Laurence Meyer, Edward Gramlich and Roger Ferguson--are all deficit hawks. If the president's own appointments won't keep the good times rolling, why should Greenspan? Furthermore, prospective Republican presidential nominee George W. Bush weeks ago announced his support for Greenspan's reappointment. Bush's principal economic adviser is former Fed Gov. Lawrence Lindsey, who has urged rate increases as a pre-emptive strike against inflation, and who is a strong supporter of Greenspan. Connecting the dots, sophisticated Fed-watchers surmise that Greenspan is casting his lot with Bush. At meetings of the Federal Open Market Committee early next year, Greenspan is expected to win an internal struggle to support his position that what he now considers a tight labor market requires the economy to be slowed down. There are reports of two dissenting votes against the rate increase in the Nov. 16 FOMC meeting--extraordinary in this consensus-driven organization. It is also reported that New York Federal Reserve President William McDonough now aligns himself with the "pragmatists." Nevertheless, the will of the chairman surely will prevail next year. This scenario could be aborted, of course, by Clinton's simple declaration that he will name Greenspan to a fourth term. That may have been the intention all along of the wily central banker.

To: gnuman who wrote (71266)	12/2/1999 10:48:00 AM
From: Les H	Read Replies (1) \| Respond to of 132070

Fed could be next for Rubin November 28, 1999 BY ROBERT NOVAK SUN-TIMES COLUMNIST Sources in Wall Street report that former Treasury Secretary Robert Rubin's new contract with Citicorp permits him to become Federal Reserve chairman as early as next year. Rubin is nominally one of the "big three" officers at the financial giant, but he reportedly requested that he not be given executive responsibility or be put in line to eventually become Citicorp's CEO. Therefore, he could be named to head the Fed by President Clinton or by a Democratic president elected in 2000. Clinton has not signaled whether he will reappoint Alan Greenspan as Fed chairman after his third term at the central bank ends next June. Greenspan and Rubin are the only possible Clinton appointments likely to be confirmed by the current Senate. Hillary anxiety Hillary Rodham Clinton's reassurance Tuesday that she really intends to run for the Senate has not eased anxiety among New York Democratic candidates about her impact on the 2000 state ticket. These office-seekers privately express apprehension about running on a slate headed by Vice President Al Gore for president and Clinton for the Senate. But party insiders see no alternative to her at this stage. Rep. Nita Lowey, the only practical Democratic possibility for the Senate other than the first lady, has promised House Minority Leader Richard Gephardt that she will seek another term from her shaky congressional seat, no matter what Mrs. Clinton does. Gephardt is pressing hard for a Democratic majority in the House that will make him speaker in 2001. McCain's journalists Sen. John McCain's presidential campaign strategists attribute the recent furor about their candidate's emotional stability mainly to outrage by his liberal journalistic admirers. Long before he began to run for president, the impact on McCain of more than five years' incarceration as a prisoner of war was talked about by colleagues in the privacy of the Senate cloakroom. "Our liberal friends in the media just now heard this stuff and became indignant," said a McCain insider. "We'd prefer to see the whole thing dropped." Ousting Armey Although J. Dennis Hastert got high marks from Republican colleagues in his debut year as House speaker, back-benchers talk about ousting Dick Armey as majority leader if the GOP keeps control of the House in the 2000 election. Rep. Steve Largent of Oklahoma, who unsuccessfully ran against Armey for leader after the 1998 election, could try again. But there is also a search for other candidates to satisfy grumbling about the lack of a strong Armey presence this year. A footnote: If the Republicans lose the House next year, it is considered unlikely that Hastert would want to serve as minority leader. The best bet for such a post: Tom DeLay, the current majority whip. V.P. Richardson Secretary of Energy Bill Richardson, with an outside chance to be Al Gore's vice presidential running mate, has taken to heart suggestions from political allies that he better shed some poundage. Using a protein diet, Richardson has taken off some 30 pounds, and now looks mean and lean. He was an influential Democratic House member from New Mexico before joining the Clinton Cabinet in 1997 as ambassador to the United Nations. A footnote: The current favorite for vice president among Democratic insiders if Gore should be nominated is Bill Bradley, his opponent for the nomination. No Democratic nominee has chosen a presidential rival as running mate since John F. Kennedy tapped Lyndon B. Johnson in 1960.

To: gnuman who wrote (71266)	12/2/1999 10:49:00 AM
From: Les H	Read Replies (3) \| Respond to of 132070

An Empty Drawer Thursday, December 2, 1999; Page A38 IF ELECTED president, Texas Gov. George W. Bush says he will seek a tax cut even larger than the one President Clinton rightly vetoed earlier this year as unaffordable. The governor says that the cut is well within the government's means and that he would pay for it out of a projected surplus in other than Social Security funds. But the surplus is an illusion, an accounting construct based on the altogether unlikely assumption that a future Congress will cut most domestic spending by more than 20 percent in real terms. The candidate never mentions such cuts. It is not even clear he has been told they would be required. His own party was unwilling to support even their first approximation in the last appropriations cycle; it ended up voting instead for increases. The further increases Mr. Bush himself has proposed in spending for defense and other items make it even less likely such a surplus will occur. A tax cut of the magnitude he proposes would thus force the government back into a policy of borrow-and-spend. That would be true even before the politicians next elected tried to deal with the looming deficit in the Medicare program. In some ways the Medicare problem makes the Social Security problem, which also has to be solved, look easy. Vice President Gore says a large tax cut would jeopardize the fiscal discipline on which the current prosperity depends. That's probably right. Mr. Bush already has been attacked by some of his rivals for the Republican nomination for having proposed too modest a cut. Like the congressional wing of the party, they do him a favor by making him seem responsible by contrast. The real-world questions he faces come from the opposite direction. His budget doesn't add up. He and his campaign staff went to great lengths to make it appear that his tax cut would help not just the better off, who pay most of the income tax because they have most of the income, but people at lower income levels. It would in fact help some, but much less than the accompanying material made it sound. Some of the material was close to duplicitous. One sentence read that "half of the revenue cost of the Bush income tax cuts would finance changes designed to help low-income families enter the middle class." That turns out to be a reference to his proposals to cut the lowest tax rate from 15 percent to 10 percent while doubling the children's tax credit from $500 to $1,000 a child. It's true those provisions eat up a large chunk of the revenue, though probably less than half. But low-income people don't benefit from them at all, since they already owe no taxes, and people at lower-middle income levels benefit only a little in absolute terms. The bulk of the savings go to the better-off. More than a third of the benefit from his plan as a whole would go to the highest-income one percent of all taxpayers, and three-fourths would go to the highest-income fifth. About 4 percent of the benefit would accrue to the lowest-income 40 percent of the population. Mr. Bush deserves credit in that he carefully stretched his plan to help some lower-middle- income families. But in the larger context of the plan, the help is marginal and was exaggerated the other day in a way that does the candidate's credibility no good. A tax cut such as this would mainly benefit a small slice of the population while jeopardizing the government's ability to fulfill much broader obligations. The making of such a proposal has become an almost obligatory part of the Republican nomination process. The Democratic candidates are dueling on health care in much the same way. They, too, propose to spend a mostly nonexistent surplus. They make the drawer sound full, but in fact it's nearly empty.