- The Washington Times - Thursday, January 6, 2000

Federal Reserve Board Chairman Alan Greenspan is President Reagan's gift that keeps on giving. After more than a dozen years of sterling performance at the helm of the world's most important central bank, Mr. Greenspan will be nominated for a fourth four-year term as Fed chairman, President Clinton announced on Monday.

Although his current term does not expire until mid-June, it was fitting that Mr. Greenspan's future status be clarified. The 10th year of expansion, for which Mr. Greenspan gets much of the credit, brings us extremely low rates of unemployment and inflation and an extraordinarily high level of investment. Indeed, the Commerce Department recently reported that the annual rate of equipment and software investment in the economy exceeded $1 trillion for the first time during 1999's third quarter. This represents an inflation-adjusted increase of more than 100 percent since 1993.

It was this investment explosion that encouraged Mr. Greenspan to embark on what some have described as the Fed's "Grand Experiment." To its credit, the Fed decided to ignore traditional economic models in the 1990s that would have required it to tighten monetary policy and reduce economic growth in order to pre-empt inflation. Instead, even as the unemployment rate continued to decline, the Fed declined to apply monetary restraint. Inflation never accelerated. Meanwhile, economic growth averaged more than 4 percent from 1996 through 1998, as the rate of productivity increased substantially.

Mr. Greenspan, of course, is hardly infallible. Neither is he immune to criticism, which this page has offered in recent months in opposition to the Fed's decisions to increase cumulatively the overnight lending rate by three-quarters of a percentage point, a process that the Fed is expected to continue early next month. In the absence of any discernible inflationary pressures, Mr. Greenspan and the Fed ought to continue their "Grand Experiment."

It is worth recalling, though, that six years ago, Mr. Greenspan and his colleagues embarked on a similar preemptive attack on inflation, which in retrospect, set the stage for the economy's rapid growth. Nobody can rule out the possibility that Mr. Greenspan's current policies may well produce the same economic-growth dividend in the future.

But there is another reason why it was appropriate for Mr. Clinton to clarify Mr. Greenspan's status at this time. It removes fears in the financial markets that the White House might have attempted to use the prospect of the chairman's reappointment to elicit a politically accommodating monetary policy beneficial to Vice President Gore's campaign for the presidency.

Arizona Sen. John McCain probably best expressed the importance of reappointing Mr. Greenspan. "I would not only reappoint Mr. Greenspan," Mr. McCain said at a Republican presidential debate last month, "but if Mr. Greenspan would happen to die, God forbid, I would do like they did in the movie, 'Weekend at Bernie's.' I would prop him up and put a pair of dark glasses on him." Here's hoping Mr. Greenspan will serve out his fourth term in good health without any such assistance from Mr. McCain.



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