Alan Greenspan, Wizard of Oz, should lose his wizard's
license

By Tom Adkins

The great wizard strode into the hallowed halls of the Senate, easing himself into a
gilded leather chair. As he cleared his throat, his audience fell silent to hear their
fortunes told. His speech was videotaped and transcribed, every word to be
parsed by financial experts across the globe.

But to those with keen ears, the speech sounded something like this: "Blah Blah
Blah Blah Blah I screwed up Blah Blah Blah."

Alan Greenspan, for all his eloquence cloaked in triple entendre and mystery,
admitted he has been driving blind on the economic superhighway.

The current pileup is his fault. Now, we are measuring the skid marks of his
economic wreck.

Mr. Greenspan, you are busted.

I don't care about the half point you knocked off the prime lending rate yesterday.
You wouldn't have to do all this tinkering if you hadn't already played Sunday
driver with the U.S. economy.

Over the last year, you jacked up interest rates, chasing an inflation boogeyman
that never existed. Our great economy promptly fell into the toilet, and trillions of
dollars were shaved off America's wealth. Now, we have zero growth. Why?
Because Your Eminence believes in Model-T economic theories in a Ferrari
economy, that's why.

Essentially, Greenspan is guilty of several violations:

Believing a simplistic "Supply-Demand" theory that states that rising demand
causes inflation. Greenspan's favorite economic indicator is scrap-iron price. Scrap
iron? Since when does Microsoft use scrap iron?

Hey, Alan . . . a new computer program costs about 35 cents to ship the CD out
the door. Development has been paid for. Now it's all profit. There is no drain on
fixed resources, and no inflation.

Thinking increased product demand equals labor demand, creating inflation. This is
the most cockeyed theory of all. Labor costs may have risen, but production costs
have dropped faster, causing deflation in many instances. Anyone checked the
prices of electronic gear lately?

Believing strong growth equals inflation. Does anyone remember the '80s? We had
even stronger growth with almost no inflation. Remember the '70s? We had no
growth and incredible inflation. Inflation can happen in dozens of ways, but rarely
from wealth creation and growth. however. Growth is simply growth. We are
building bigger, better and faster mousetraps and reaping the rewards. What's
wrong with that? Now, stupid monetary policy - that creates inflation.

Accusing the stock market of growing "too fast." What a hoot! The stock market
represents public confidence in wealth creation. This confidence is not measured
only in bricks and mortar anymore. Intellectual value is often more important.
Maybe if today's politicians held real jobs and actually used computers, they'd
understand the new economy.

Why, if Greenspan is wrong, did an economy zipping along at 5 percent growth
screech to a halt? First, tax thresholds haven't changed since the 1993 increases.
As the economy grows, this has the slowing effect of a tax increase. Second, the
Microsoft anti-trust legislation proved no good idea goes unpunished by the
government. Investors pulled back from the high-tech cutting edge, and innovation
hit a brick wall. A stock market and retail pileup followed. Now, we are in the
body shop fixing the dents.

Shall we repair the wreck with tax cuts or interest rate cuts? Tell me - why do half
the repairs? What good is a rate cut without money to spend? Tax cuts put money
back in the wallet and into the economy. Last week, Greenspan told the Senate
Budget Committee a tax cut might do "noticeable good" for the American
economy. Duhhh. Tax cuts always do noticeable good for the economy. Every tax
cut since 1960 boosted growth and revenue. Every tax increase since 1960 has
slowed growth and slowed revenue.

You might wonder why a smart man like Alan Greenspan cannot grasp these
obvious issues. Perhaps he's been looking at the Beige Book instead of watching
the road. Or maybe he's been on the cell phone chatting with his liberal wife's
liberal friends instead of looking where he's driving. Oh well, better swerving late
than never.

Whatever the reason, Alan Greenspan has been driving 25 in a 65 m.p.h. zone,
missing too many curves, and he keeps plowing through stop signs then driving
with his left blinker on for miles on end. And he has a history of bad driving, having
engineered another major wreck in time to help the Clinton election in 1992.
Maybe it's time we yanked his license.


Tom Adkins is executive publisher of

the Common Conservative ( www.commonconservative.com ).

SOURCE:
http://inq.philly.com/content/inquirer/2001/02/01/opinion/ADKINS01.htm 

Tom Adkins