THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, February 27, 1996 TAG: 9602270012
SECTION: FRONT PAGE: A10 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 56 lines
The Republicans underestimate President Clinton at their peril. On the evidence to date, there is only one consummate politician in the race for president and he's it. The reappointment of Alan Greenspan as head of the Federal Reserve is an illustration.
Greenspan has managed the recovery from the Bush recession masterfully. Unemployment is low. Another recession has been avoided - so far. Growth has been slow but steady. Interest rates are relatively low.
Critics claim Greenspan hasn't cut rates far enough fast enough and that he's a better friend to bondholders than to working men. In particular they fault him for giving economic growth a lower priority than inflation fighting.
But Greenspan can answer that in an economy burdened by high government deficits the solution must come from fiscal policy not monetary policy, and why haven't the politicians done more to reduce the deficit? Good question.
Politically, Clinton was confronted with an interesting problem. He needs the fed to keep the economy on an even keel through November. A recession would doom his re-election hopes. That points to the reappointment of Greenspan. But he also needs to placate those in his party who claim Greenspan's doing more for Wall Street than for Main Street in not pushing growth.
His answer was to propose growth enthusiast Felix Rohatyn for a seat on the board. Republicans let it be known they'd oppose Rohatyn and he withdrew. Interestingly, the GOP no longer seems to have a vocal pro-growth wing unless you count Steve Forbes. Clinton can now claim he tried to go after growth but was thwarted by a Republican Congress.
At the same time, his reappointment of Greenspan ought to mean a Fed doing all it can to avoid recession between now and November, and it disarms the Republicans since Greenspan is their man. A possible campaign issue has been neutralized.
Finally, and most interestingly, Clinton has offered Office of Management and Budget head Alice Rivlin a seat on the Fed. She's among his administration's most respected and reliable deficit hawks. Putting her on the Fed means there will be little push for growth policies there. But it also may be a sign that deficit fighting is going to take a backseat to growth at the White House.
Rivlin could be said to have kept the adminsitration honest on deficits. But Clinton may have concluded that the appetite of the voters for the pain of deficit fighting has been tested and found wanting. By sending Rivlin to the Fed, Clinton could be removing an impediment to feel-good policies. Don't be surprised if Clinton lets the Republicans advocate cuts, austerity, discipline and pain while he advocates growth and opportunity. It could be a winning strategy, politically. by CNB