Greenspan says no, on both counts.

From Ip and Steel in the Wall Street Journal:

In a withering critique of his fellow Republicans, former Federal Reserve Chairman Alan Greenspan says in his memoir that the party to which he has belonged all his life deserved to lose power last year for forsaking its small-government principles.

In “The Age of Turbulence: Adventures in a New World,” published by Penguin Press, Mr. Greenspan criticizes both congressional Republicans and President George W. Bush for abandoning fiscal discipline.

…

Mr. Greenspan, who calls himself a “lifelong libertarian Republican,” writes that he advised the White House to veto some bills to curb “out-of-control” spending while the Republicans controlled Congress. He says President Bush’s failure to do so “was a major mistake.” Republicans in Congress, he writes, “swapped principle for power. They ended up with neither. They deserved to lose.”

From the NYT:

Though Mr. Greenspan does not admit he made a mistake, he shows remorse about how Republicans jumped on his endorsement of the 2001 tax cuts to push through unconditional cuts without any safeguards against surprises. He recounts how Mr. Rubin and Senator Kent Conrad, Democrat of North Dakota, begged him to hold off on an endorsement because of how it would be perceived.

“It turned out that Conrad and Rubin were right,” he acknowledges glumly. He says Republican leaders in Congress made a grievous error in spending whatever it took to ensure a permanent Republican majority.

But the most telling statement comes from Bloomberg:

Greenspan saved his harshest analysis for the current president. Soon after Bush took office in 2001, the president set about implementing a campaign promise to cut taxes, a policy Greenspan said he believed at the time wasn’t well conceived.

“Little value was placed on rigorous economic policy debate or the weighing of long-term consequences,” he wrote.

In 2001 testimony before Congress, Greenspan was widely interpreted to have endorsed Bush’s proposal to cut taxes by $1.6 trillion over 10 years. In the book, he characterized his testimony as politically careless and said his words were misinterpreted. [emphasis added – mdc].

And so it is, despite all the talk of a surge in tax receipts and the (projected) elimination of the budget deficit, the FY2006 full employment budget balance to GDP ratio is 3 percentage points lower than it was in FY2000, the standardized tax revenues to GDP ratio 1.7 percentage points lower, and standardized expenditures 1.3 percentage points higher (see CBO (Aug. ’07)).

The view espoused in bold italics is telling. It confirms yet again the central aspect of policymaking in the current Administration. One doesn’t have to agree with the economic views of Greenspan to view with alarm the aversion to analysis. From steel tariffs, tax cuts in 2001 and 2003, the defunding of financial regulation (think OTS), Medicare Part D, to energy policy (such as it is), one can see the consequences of this peculiar characteristic of the Bush Administration.

Indeed, it is this characteristic that explains why we remain in “The last throes of Pomo Macro”, just like we remain, some two and one quarter years after Cheney’s assertion, in the “last throes of the insurgency”.

As social scientists, we should try to explain why the current Administration behaves in this manner. One approach is the capture and ideology perspective of Kalt and Zupan (1984). Although not directly applicable (since their study was of legislative actions), the framework is of interest. If policy is captured by economic interests, then analysis is irrelevant. If ideology is paramount, then again analysis is irrelevant.

Admittedly, the approach is limited because it does not explain why analysis and expertise was held in higher regard during other periods and other Administrations. In other words, time variation in the dominance of capture and ideology — versus the public interest motivation — is not explained. This survey suggests some possible explanations, and provides this reading about the importance of understanding why “capture” occurs.

A final, important issue to consider is that of costs of capture. Is capture a big problem? On the one hand, capture could have large distributive consequences when it transfers income from, say,consumers tofirms. This could be enough of a reason for the political principal to want to curb capture. Moreover, capture may cause net wealth losses. Measuring these is another area in which more research should be done.

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