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24.2.03

Greenspan's Fed Future In Doubt

When he publicly undercut President Bush's proposals to stimulate the economy, Alan Greenspan opened the door to widespread speculation that his career as chairman of the Federal Reserve may be drawing to a close.


I think Bush will be reluctant to let Greenspan get out of the fold. While confidence in his abilities has been (perhaps unfairly, since the Fed doesn't have total control of the economy) eroded by the recession, he is still widely held to be one of the wisest gurus of American economics. If Bush lets on that he wants Greenspan gone, he will only confirm the strengthening conventional wisdom about the administration's fiscal irresponsibility. This danger is increased by Greenspan's recent repudiation of Bush's tax cut plan. Standing up to the president won the Fed chief a place in the hearts of Democrats -- the very people who will be making the "Bush can't manage the economy" claim.

Greenspan seems to be in the same position, in terms of job security, as Colin Powell. Both men have too large a constituency for Bush to mess with them too blatantly. The only way either man will go is if a lot of backroom pressure gets them to resign in a way that exonerates Bush -- a tricky task to pull off, since the rumors that Bush forced them out are inevitable.

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