Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : PROPAGANDA -- Ignore unavailable to you. Want to Upgrade?

To: KLP who wrote (222)	12/28/2000 5:47:14 PM
From: Carolyn	Respond to of 318

These are wonderful!!!

To: KLP who wrote (222)	12/28/2000 8:12:10 PM
From: Carolyn	Read Replies (1) \| Respond to of 318

A Dick Morris editorial about Bush and Greenspan: nypostonline.com GREENSPAN'S LESSON FOR BUSH Tuesday,December 26,2000 ------------------------------------------------------------------------ EVEN as President Bush II grapples with training the puppy Governor Christine Todd Whitman gave him, Fed Chairman Alan Greenspan is paper training the new president. When Greenspan refused to cut rates at the Fed meeting last week, he was sending a signal to Bush II - if you want to cut taxes, don't expect me to cut interest rates. Greenspan will use the threat of no rate cut to keep Bush from spending the surplus on a tax cut. Bush would do well to study the early Clinton years, when Greenspan reached a modus vivendi with the new president. Here's the deal: The Fed would cut rates if Clinton raised taxes. When I asked the new president in 1993 why he had to raise the gasoline tax (at that point the proposal was in its previous incarnation as a BTU tax), he gave me a one-word answer: "Greenspan." Elaborating, Clinton made it clear that the Fed not only wanted the deficit cut, it wanted it cut through a tax increase. Further, just any tax increase wouldn't do; it had to be a tax that would fall on the broad mass of Americans. "Why?" I asked. "The raise you're planning in the top brackets of the income tax will generate the bulk of the revenue; why do you need an energy tax, too?" Clinton answered, "Because Greenspan won't believe that we're really serious about cutting the deficit unless we bleed some political blood in the tax increase. The upper brackets of the income tax are too easy. They want to see me suffer before they'll believe I mean it about cutting the deficit." Clinton suffered, all right. He lost Congress in 1994 and laid the basis for six years of misery just to show Greenspan and the bond market that he meant it when he said he'd cut the deficit. But the long-term result was a Fed that kept rates compliantly low and maintained eight years of prosperity. For Clinton, it was worth the pain. In this pre-inaugural period, Greenspan is putting Bush II through his paces. The more Bush II talks about a tax cut, the more Greenspan will refuse an interest-rate cut. The Fed won't let out the tight monetary policy if Bush II is planning to open the doors to the federal treasury with a stimulative fiscal policy. The Federal Reserve Board is too institutionally committed to fighting inflation and too scarred by the hyperinflation of the '70s to let out the brakes on monetary and fiscal policy at the same time. Every president needs to go through a period of adjustment to the Fed. The Bush family has its particular remembered pain, blaming Greenspan for Bush I's defeat. Despite evidence of a coming recession through all of 1991 and 1992, Greenspan waited so long to cut rates that Bush I was defeated by an angry electorate. "Don't trust Greenspan" became the mantra among Bush loyalists. Now, anxious to show Bush II who is boss, Greenspan skillfully notes that a recession may be coming but defiantly postpones any rate cut. With Bush II trumpeting a $1.3 trillion tax cut over ten years as the panacea to avert a temporary cyclical recession, Greenspan wants to kill, or at least temper, the tax cut before he comes through with a saving cut in interest rates. The more Bush talks tax cuts, the more Greenspan will dig in his heels and hold steady on interest rates. Since it takes six months for any rate cut to begin to have an effect, and this divided Congress is not about to hand Bush the keys to the treasury with a huge tax decrease, Bush would be well advised to tone down the tax-cut rhetoric. He needs to signal Greenspan that he'll behave well enough to deserve a rate cut. If he keeps pushing for a big tax cut, he won't get a rate cut. That's how Alan Greenspan disciplines presidents. Otherwise, Bush II should ask Bush I what happens to a president and his re-election prospects when the Fed won't cut rates during a recession.