Last week Federal Reserve Chairman Alan Greenspan made President Bush very happy by publicly embracing tax cuts as an elixir for the ailing economy. On Jan. 30, Bush returned the favor. Just weeks after commenting effusively about the Fed's decision to cut interest rates, the new President declared that he would never do so again. Ever. From now on, he'll remain mum about the deliberations of Greenspan & Co. "He's an independent voice and needs to be an independent voice," Bush declared at a White House photo opportunity.
Bush was roundly criticized by economists -- even some Republicans -- for reacting to the Fed's Jan. 3 decision to cut rates by half a point. While that was before Bush was sworn in as the 43rd President, in doing so he still violated an unwritten rule that the nation's chief exec doesn't comment on the Fed's actions. The prevailing wisdom: The Federal Reserve should remain above the din of Washington politics and make its decisions solely on the basis of economic considerations.
At the time, Bush's chief spokesman, Ari Fleischer, declared that Bush would go his own way: The new President would comment from time to time on Greenspan's decisions if he felt it appropriate, Fleischer said.
But as any Fed watcher knows, the act of commenting on Fed decisions can get very wiggy in quick fashion. For example, critics immediately posed this question: If Bush were to comment selectively on Fed decisions, would a refusal to comment be seen by the markets as a slap at Greenspan?
So much for that. Bush proved to be a quick learner. Explained the President on Jan. 30: "Mr. Greenspan needs to make his decisions independent of what I think. I learned a pretty good lesson during the transition, and that was I had commented out loud about one of the actions he took. That's the last time I'm going to comment about the actions that Mr. Greenspan takes."
By Richard S. Dunham in Washington
Edited by Douglas Harbrecht