IMAGINE how George Bush must feel about Alan Greenspan.
Throughout the summer and fall, as the economy struggled to recover, long-term interest rates remained stuck around 8 percent. Mr. Bush's claim that economic growth was around the corner rang hollow, and Mr. Clinton kept gaining on him.
President Bush's administration officials, led by then Treasury Secretary Nicholas Brady, wanted Mr. Greenspan to lower rates. They alternated between privately courting Mr. Greenspan and publicly criticizing him. But to little avail.
No sooner had Bill Clinton been elected than long-term rates began tumbling, fueling a stronger recovery and sending consumer confidence, the stock market and the president's own political stock soaring. This despite the fact that President Clinton is behaving much like a tax-and-spend liberal.
Mr. Greenspan, both in his public testimony and in the Fed's monetary policy, has been fully supportive of the Clinton economic plan. This has helped coax rates downward.
Today 30-year Treasury bonds are fetching just 6.8 percent and heading still lower. Mortgages can be had for a stunning 7.5 percent.
Amazed consumers are refinancing homes, businesses are happily borrowing and investing at lower interest rates; state and municipal governments are trimming borrowing costs, and even the federal government is saving on financing the national debt. Had these surprising conditions obtained last September, Millie would still be first dog and Socks would be in Little Rock with Chelsea.
What gives? Do money markets really prefer liberal Democrats? And why did Mr. Greenspan, a conservative Republican and Bush appointee, deliver for Mr. Clinton and not Mr. Bush?
The answer has several parts. For one thing, President Bush and Mr. Brady did a clumsy job enlisting Mr. Greenspan's help, whereas Mr. Clinton has courted the chairman deftly.
For another, Mr. Bush's absolute resistance to any tax increase precluded the kind of budget deal being made by Mr. Clinton and the congressional Democrats. The Clinton budget seems to have persuaded the money markets that the deficit is at last on a downward course.
The budget package similarly reassured the Federal Reserve. And the Fed, in turn, is now doing everything it can to help Mr. Clinton's economic plan succeed. That gives the money markets further reassurance.
Chairman Greenspan had a basic choice after Mr. Clinton's PTC election. He could have played spoiler, and continued to run a fairly tight money policy. Or he could have concluded that the Clinton package was about right, and decided to share the credit for its success. It's now clear which course he chose, and Mr. Greenspan can expect reappointment by a grateful president, as well as regular VIP treatment at the Clinton White House.
Of course, the chairman does not entirely control the Fed, nor does the Fed dictate to money markets. But the Fed can exercise great influence through the signals it sends.
For example, the Clinton Treasury did a very clever thing in January, when it began selling fewer 30-year bonds. That made 30-year bonds scarcer in the marketplace, which lowered the interest rate that the government had to offer to find buyers.
The Fed quietly signaled approval of this strategy. In turn, that suggested to the markets that Mr. Greenspan was working closely with Mr. Clinton and reinforced a market psychology of lower interest rates.
This unlikely turn of events has given Republican loyalists hives. For example, economist Lawrence Kudlow, a former Reagan budget official and a familiar conservative commentator, recently wrote an overheated editorial page article in the Wall Street Journal with the lurid title, "The Seduction of the Fed."
Mr. Kudlow, long a crusader for lower interest rates, is torn between his natural supply-side bullishness and his distasteful incredulity that a liberal economic program might actually succeed. "There's no question that President Clinton's cross-the-board tax increases," he begins, "will throw a wet blanket over the recovery." Yet the economy is coming back to life, thanks in part to Mr. Greenspan.
Mr. Kudlow concedes that "inflationary pressures are non-existent," which suggests interest rates should be low. But he admonishes the Fed not to keep easing rates. He concludes with a vague warning that, "We do not yet know whether Greenspan and Co. can again be relied upon to act as a willing accomplice."
About all supply-siders can do these days is play dog-in-the-manger. The fact is that interest rates easily could have fallen further as long as a year ago, well before the election. Inflationary pressures began evaporating after the gulf war, when energy costs subsided.
In sum, Mr. Bush could have had a deficit-reduction/low interest rate deal with the Fed and the money markets any time he wanted. But instead he let his ideological aversion to taxing the rich deny him a budget deal, and re-election.
As Messrs. Bush and Brady, in forced retirement from public life, pay higher taxes on their higher private-sector incomes, they can be consoled with those nice low interest rates -- courtesy of Alan Greenspan and the Democrats.
Robert Kuttner writes a column on economic matters.