When President Clinton announced at a press conference Tuesday that he was nominating Alan Greenspan for another four-year term as chairman of the Federal Reserve, he told the veteran economist to stand in a specific spot. "This is the only time I'm interfering with the independence of the Fed," the president joked.
Publicly, the Clinton administration has never challenged Fed monetary policy. Who knows what "pretty pleases" have been made by Mr. Clinton or the Secretary of the Treasury at private sessions with Mr. Greenspan, say as an election approached. But Greenspan has done such a good job of managing monetary policy in his 12 years on the job that Clinton can only be grateful. The economy is thriving.
Clinton rightly spoke of the chairman's "rare combination of technical expertise, sophisticated analysis, and old-fashioned common sense."
One of Greenspan's notable accomplishments occurred two months after he took office. In October 1987, the Dow Jones Industrial Average plunged 508 points, or 22.61 percent. The Fed leaped to the market's assistance with promises of liquidity and a burst of extra money. The United States economy sailed through the excitement almost untouched.
Another less dramatic success happened a decade later when the unemployment rate dropped below 5 percent. Many economists were saying that an unemployment rate under 6 percent would kick off more inflation. Greenspan ignored the clamor and didn't try to halt the expansion. So we have the combination today of prosperity, low inflation, and low unemployment.
A third Greenspan achievement has been opening up Fed policymaking to greater public transparency. Fed decisions are announced right after they are made, with no apparent harm to markets. Previously only professional Fed watchers dared read the Fed's tea leaves. Now its policy is more understandable to the general public.
So we are delighted to see Greenspan get another go at a job he apparently just loves. The Senate certainly isn't likely to block his appointment. That would risk antagonizing not only Wall Street, but a world financial community that welcomes Greenspan's steady hand on the economic tiller.
(c) Copyright 2000. The Christian Science Publishing Society