USA: Greenspan critical of Bush, says war kept oil price from rising

Former U.S. Federal Reserve Chairman Alan Greenspan said Bush's combination of tax cuts and spending on the military and prescription drug benefits, while not "unrealistic" in 2000 after several years of federal budget surpluses, was not appropriate with growing deficits that returned in 2002. "I thought that the structure of the tax cut was fine but it had to be paid for, and there's where my criticism is. It's not on the tax cut, it is on the fact that spending is not being funded," Greenspan said in an interview with NBC's "Today" program. In his book, "The Age of Turbulence: Adventures in a New World," Greenspan said he was surprised Bush was unwilling to temper his campaign promises with fiscal reality once elected in 2000, as previous Republican administrations had done. Greenspan's long association with Republican administrations and his reputation for independence add clout to his criticism of Bush and of other Republicans who led Congress until 2006. The former central banker also said that had the U.S. not gone to war in Iraq, the cost of oil would be higher, as much as 130 U.S. dollars per barrel compared to the current 80 U.S. dollars. "The way I read Saddam, that's the way he was going," Greenspan said. Fending off criticism that rock-bottom borrowing costs early this decade fuelled the housing bubble that has caused a burst of foreclosures, Greenspan said the unusual risk of a downward price spiral was serious and had to be dealt with. "The low interest rates were caused by global forces and we couldn't move the interest rate up, indeed we tried and because of that we had a bubble but so did all these other countries," Bush said. Greenspan said the U.S. economy appeared to be faring well, despite the bursting of the housing bubble and stress in financial markets. "The economy at this stage .... despite the financial problem, is still holding up," he told NBC's "Today" program. Greenspan, now 81, was the second longest-serving chairman in the Fed's 93-year history when he stepped down in January 2006. Praise has been heaped on the New York native and self-described "libertarian Republican" for overseeing the longest U.S. economic expansion on record.

ITN Source | September 18, 2007

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