- The Washington Times - Monday, October 24, 2005

President Bush’s nomination of White House economic adviser Ben Bernanke to succeed Federal Reserve Chairman Alan Greenspan was hailed yesterday by supply-side tax cutters who say he will maintain the longtime Fed chief’s monetary pro-growth policies.

There was virtual unanimity among conservative economists that Mr. Greenspan — who has led the Fed through good times and bad for nearly two decades — leaves some big shoes to fill, but that Mr. Bernanke, a former Fed governor who leads the White House Council of Economic Advisers, would continue his anti-inflation and strong-dollar policies.

“I think Bernanke is great and will do an equally good job. He’s a stable, solid economist who knows monetary politics and policy,” said economist Art Laffer, a key advocate and draftsman of President Reagan’s tax cuts in the 1980s.

Mr. Greenspan, a conservative who guided Fed policy through the “Black Monday” stock market crash of 1987 and the tech-stock market bubble that imploded in early 2000, is both a supporter of tax reductions to boost economic growth and a deficit hawk.

“Those same characteristics are present in Bernanke. He will be fine on tax cuts and the deficit,” Mr. Laffer said yesterday.

During his 18 years as Federal Reserve chairman, Mr. Greenspan, 79, presided over an era of sustained prosperity that included a 30-year low in the unemployment rate and a stock market boom so extraordinary that he felt obliged to warn investors against “irrational exuberance.”

Some analysts say Mr. Greenspan’s biggest achievement was his early recognition of a fundamental change in the U.S. economy. As growth accelerated in the mid-1990s, many economists wanted the Fed to raise interest rates to keep prices from soaring. Mr. Greenspan let the boom continue.

Mr. Greenspan moved aggressively when the stock market bubble did collapse, cutting the central bank’s overnight lending rate 13 times between January 2001 and June 2003 to a 45-year low of 1 percent. The economy went through a mild yet stubborn recession.

Former New York Rep. Jack Kemp, chief architect of the Reagan tax cuts, yesterday was exuberant about Mr. Bush’s choice of Mr. Bernanke to lead the Fed during a time of public anxiety about the economy.

“He will target both inflation and deflation. He’s pro-free enterprise, pro-growth and pro-stability for the dollar, which is a central tenet of classical supply-side economics,” Mr. Kemp said.

Mr. Bernanke is known not only for the clarity of his rhetoric, but also for his free-market conservatism, economists say.

“He’s very driven on the inside, but comes across as a very calm personality — strong-minded but not argumentative,” former Fed Vice Chairman Alan Blinder told Fortune magazine earlier this year.

During White House briefings, Mr. Bernanke comes across as “genuinely interested in what people have to say. It was a refreshing change from most of the folks in this administration. He seemed interested even when he disagreed with you,” said Larry Hunter, a senior official with the Free Enterprise Fund and former chief economist for the U.S. Chamber of Commerce.

The big question, economists say, is whether Mr. Bernanke will continue Mr. Greenspan’s policy of gradual interest rate increases to keep inflation at bay, a policy that some economists fear will undermine economic growth.

“He appears to be giving Wall Street exactly what it asked for: an inflation hawk. That would pose real dangers, but don’t pigeonhole him too soon,” said University of Maryland economist Peter Morici, who has been a critic of the higher interest rates.

“Just like a Supreme Court nominee, we really won’t know how Bernanke will vote until he is on the job,” Mr. Morici said.

But economist Kevin Hassett at the American Enterprise Institute for Public Policy Research thinks Mr. Bernanke is a Greenspan clone on inflation.

“He’s likely to maintain the present course,” he said.

• This article is based in part on wire-service reports.

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