- The Washington Times - Thursday, February 27, 2003

Democratic senators yesterday accused the White House of mounting a "whisper campaign" against Federal Reserve Chairman Alan Greenspan for not fully endorsing the president's tax-cut plan. They put forward a resolution supporting Mr. Greenspan.
As the central bank chief sat at the witness table at a Senate Banking, Housing and Urban Affairs Committee hearing, Sen. Charles E. Schumer, New York Democrat, spoke of "an ongoing, orchestrated whisper campaign" to discredit Mr. Greenspan, who heads an independent agency.
"Some in the administration are sending a clear message: You are either with us or against us," Mr. Schumer said. "It is a heavy-handed attempt to corrupt the objectivity of the Fed that is so vital to the confidence of our financial markets."
He gave no examples.
The Bush administration is trying to persuade Congress to approve the $670 billion tax-cut plan, including a centerpiece proposal to slash the tax on investor dividends. President Bush predicted Tuesday that Congress would enact the plan and bolster the faltering U.S. economy, which White House advisers said was being slowed by the threat of war in Iraq.
Mr. Greenspan, in testimony to the banking panel two weeks ago, warned that further tax cuts should be paid for. That led Democrats to proclaim that Mr. Greenspan had delivered the "kiss of death" to Mr. Bush's proposal. The White House pointed out that Mr. Greenspan had endorsed the plan's centerpiece, elimination of the tax on stock dividends.
The Fed chairman said future tax cuts should be paid for, either by spending cuts or tax increases. Mr. Bush does not propose that. Mr. Greenspan also raised doubts about one of Mr. Bush's biggest arguments, that the economy needs another round of government stimulus.
He contended that once the uncertainty over war in Iraq passes, economic growth should accelerate without the need for additional tax cuts.
Mr. Greenspan did not comment on the matter at yesterday's hearing, which was devoted to proposals to overhaul the deposit insurance system.
Mr. Schumer and the other Democrats Sens. Jon Corzine of New Jersey, Debbie Stabenow of Michigan and Thomas R. Carper of Delaware want the Senate to vote on a resolution expressing support for Mr. Greenspan. It declares that Mr. Greenspan "should be recognized for his outstanding leadership of the Federal Reserve, his exemplary conduct as Federal Reserve chairman and his commitment as a public servant."
A Republican member of the committee, Sen. Jim Bunning of Kentucky, has been sharply critical of Mr. Greenspan for some time and recently complained to him: "You are once again interjecting yourself into matters in which you have no business."
Mr. Greenspan, asked at the hearing about this month's drop in consumer confidence to the lowest level in nearly a decade, said it was "a very significant decline" but not a surprise.
Indicators of consumer confidence tend to be affected by events that consumers are deeply aware of, such as the recent sharp rise in gasoline prices and prospects of war with Iraq, Mr. Greenspan said.
The Consumer Confidence Index fell to 64.0 its lowest reading since October 1993 from 78.8 in January as Americans grew increasingly worried about the effects of a possible war on jobs and oil prices, the Conference Board business group reported Tuesday.
Treasury Undersecretary Peter Fisher, testifying at the hearing with Mr. Greenspan, said the report highlighted the need for policy-makers to enhance economic growth. Mr. Fisher also cited several bright spots in the economic picture, such as continued strong consumer spending on big-ticket items.
Mr. Greenspan also reiterated the Fed's opposition to raising the $100,000 limit on deposit insurance coverage, saying there would be no clear public benefit.
The Federal Deposit Insurance Corp. says the limit has been eroded by inflation to only half of what it was worth in 1980 and should be pegged to the Consumer Price Index.
Mr. Greenspan has said that doing so would provide a subsidy for wealthy people.

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